S.Korean economy seen returning to growth in Q3 but virus worries remain

Asia's fourth-largest economy is estimated to have expanded by a seasonally adjusted 1.7% in sequential terms during the July-September period, according to a median forecast of 12 economists polled by Reuters

  
Pedestrians wearing masks walk on a zebra crossing amid the coronavirus disease (COVID-19) outbreak in Seoul, South Korea, September 29, 2020.

Pedestrians wearing masks walk on a zebra crossing amid the coronavirus disease (COVID-19) outbreak in Seoul, South Korea, September 29, 2020.

Reuters/Kim Hong-Ji

SEOUL  - South Korean economy likely returned to growth in the third quarter, after plunging into a recession in the previous quarter, a Reuters poll showed on Friday, due to a lower base, virus-related fiscal stimulus and a gradual recovery in exports.

Asia's fourth-largest economy is estimated to have expanded by a seasonally adjusted 1.7% in sequential terms during the July-September period, according to a median forecast of 12 economists polled by Reuters.

It would be the fastest quarterly growth since the second quarter of 2010. The previous quarter had seen a 3.2% fall - the sharpest contraction since 1998. 

The expectations come on the heels of the government rolling out around 310 trillion won ($273.57 billion) worth of stimulus, including four supplementary budgets, and ample monetary easing.

"The government spending led the third-quarter growth, with a rebound in exports and improved consumption on stabilising COVID-19 situation likely contributing to the growth," said Park Sang-hyun, Hi Investment & Securities' chief economist.

Government data showed the country's exports rose for the first time in seven months in September. urn:newsml:reuters.com:*:nL4N2GS02X

But, many economists expect the rebound to be temporary.

"The fourth-quarter GDP is most likely to slow down due to resurgence in coronavirus infections in Europe and the United States, with U.S. election uncertainties persisting," said Eugene Investment & Securities' chief economist Lee Sang-jae.

Rising infections at home is another risk, with South Korea on Friday reporting its highest jump in daily cases since mid-September.

On a year-on-year basis, GDP likely shrank 1.9% in the September quarter, slower than a 2.7% contraction in the June quarter.

Last week, the Bank of Korea governor said the economy currently was on track to meet the bank's forecast for a 1.3% contraction this year, which would be the biggest since the Asian financial crisis in 1998. 

($1 = 1,133.1600 won)

(Editing by Uttaresh.V) ((joori.roh@thomsonreuters.com; +82 2 6936 1493))

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