BoK discloses dip in GDP growth due to MERS outbreak

The release of advance GDP figures for Q2 2015 is basically set to be a non-event, as BoK Governor Lee Ju-yeol already disclosed a flash estimate of 0.4% qoq, at the press conference following the MPC meeting on 9 July. He attributed the significant slowdown in GDP growth to the MERS (Middle East Respiratory Syndrome) outbreak and the drought. 

Growth in key components of Q2 GDP can be calculated using the H1 GDP growth forecasts in the BoK's macroeconomic outlook also announced on 9 July. Consumption is likely to have been the main driver of the GDP slowdown, with qoq growth falling from 0.6% in Q1 to zero in Q2, probably due to MERS concerns. Construction investment looks set to show still-healthy growth of 1.7% in Q2 after the volatile shifts of -7.8% in Q4 2014 and 7.4% in Q1 2015. 

Facility investment is likely to have remained sluggish at 0.2% in Q1 and Q2, while both exports and imports of goods are set to show a pretty strong recovery of 1.3% and 1.1% each after the contraction in Q1. If these flash estimates are correct, we can conclude that the weakness in consumption overwhelmed the rebound in exports. In H2, the key thing to monitor will be whether the BoK's assumption of an instant recovery in consumption and the continued strength in exports proves to be correct or not.