Private & government consumption, investment decreased in 2Q

The private consumption, government consumption, and investment of South Korea all decreased in the second quarter of this year. There are only four countries, including South Korea, whose all three metrics decreased among the 30 largest economies in the world.

According to the data provided by the Bank of Korea to Rep. Jin Sun-mee, a member of the Strategy and Finance Committee of the National Assembly and a member of the Democratic Party of Korea, on Sunday, private consumption in the second quarter recorded 206.53 billion dollars, which is 2.47 percent lower than the previous quarter. The government consumption was 79.04 billion dollars, down 5.84 percent from the previous quarter. Gross fixed capital formation, which is the amount of investment made by producers in capital goods for production, decreased by 3.23 percent. The private consumption, government consumption, and gross fixed capital formation fell 0.1 percent, 2.1 percent, and 0.1 percent in the second quarter compared to the previous quarter based on the real rate of increase/decrease.

As the national finances struggled, the country experienced a larger drop in its total spending compared to other major countries. According to the data collected by the IMF, South Korea’s gross domestic expenditure is expected to decrease by 56 trillion won, or 9.0 percent, this year compared to the year before while the total income is expected to decline by 48.8 trillion won or 8.3 percent. The country's total expenditure reduction rate is the largest among the top 20 economies whose data is collected by the IMF.

In addition to a reduction in exports, South Korea’s economic growth rate is expected to be below two percent this year due to sluggish investment. The IMF lowered its forecast for the country’s economic growth rate from 2.0 percent in October last year to 1.4 percent in October this year. Meanwhile, the organization raised the global economic growth rate from 2.7 percent to 3.0 percent and that of advanced countries from 1.1 percent to 1.5 percent.


facthee@donga.com