Headline: "Exports Lead the Charge in South Korea's Third-Quarter Growth"

The South Korean economy is expected to have recovered in the third quarter following a slight contraction in the second quarter. This recovery is attributed to an increase in exports, which is believed to have helped offset the impact of high borrowing costs on domestic demand. A survey of economists forecasts that the country's gross domestic product (GDP) grew by a seasonally adjusted 0.5% in the July-September period. This expansion represents a recovery from the unexpected 0.2% contraction recorded in the April-June quarter. On an annual basis, the country's GDP is estimated to have grown by 2.0% in the third quarter, down from the 2.3% growth observed in the previous quarter. This estimate is based on the median forecast of a survey conducted with 26 economists between October 15-21.

South Korea's monthly exports have increased by an average of about 10% until September this year, largely driven by semiconductor demand from the United States. This robust export performance helped the trade-dependent economy avoid a situation widely defined as a technical recession, characterized by two consecutive quarters of contraction. However, export growth has slowed in recent months due to declining trade with China, South Korea's largest trading partner, as well as with Japan and India. The country is also grappling with high borrowing costs, which are dampening domestic consumption in an environment where it has some of the highest household debt levels in the developed world.

To stimulate demand, the Bank of Korea (BOK) cut its policy rate by 25 basis points from 3.50%, the highest level in 15 years, earlier this month. Despite this move, the BOK is expected to maintain its current policy stance for the remainder of the year, implementing only an additional 50 basis point cut in 2023. This expectation contrasts with the U.S. Federal Reserve, which is projected to cut rates by 150 basis points by the end of 2025.

With the uneven recovery in China and slowing demand from the U.S., South Korea's economic growth is projected to average 2.4% this year, aligning with the recently lowered forecasts of the central bank.