The economy of South Korea shrank unexpectedly in the first quarter of the year. This is the worst performance of its economy since the global crisis in finance, as their company’s investment got slashed; all attempts made by its government for bringing the strong pace like previous quarter got failed.
The sudden and shocking contraction that the central bank is planning for making U-turn over its policy bolstered the views of the financial market. They are planning to shift to an easing position by cutting rates of interests for balancing their confidence degraded due to a decline in businesses and the growth of external risks.
On Thursday, the BOK said that the capital investment of first quarter got hit because of the downturn in the sector of memory chips below expectations, and the failure of exports created the Sino-US dispute of trade resulted in lost gains earned through private consumption.
On Thursday, the BOK said that their GDP has fallen to 0.3% this year’s first quarter which is much less than the previous year’s quarters. Last time, the price drop was seen in by the rate of 3.3% at the end of the year 2008.
It was forecasted by economic analysts that the growth rate will reach up to 0.3% but no economists had expected contract’s growth.
The official of BOK said that the expenditure of government failed which was done for keeping higher the boost of the fourth quarter. The government’s main focus was on construction investment.
Because of the downturn in the sector of memory chips, the attempt made by the government resulted worst than expectations of business investments.
One day after the unveiling of a supplementary budget of 6.7 trillion by the Korean government, grim data had come; this budget was unveiled to tackle the unknown level of air pollution and for boosting weak exports.
BOK said that the tumbling of capital investment by 10.8% and reduction of construction investment by 0.1% is the worst analysis after 1998. The exports dropped by 2.6% which is worst reading according to an analysis of the past 3 months.