South Korea's economy rebounds in Q2, but concerns still remain
CGTN
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South Korea's economic growth rebounded in the second quarter of 2019, increasing at its fastest pace in two years despite worsening trade tensions with Japan.

Data from the Bank of Korea published Thursday showed the economy expanded by 1.1 percent in the April-June quarter, with consumption and manufacturing all recovering after a poor first quarter performance.

Year-on-year growth stood at 2.1 percent, after an increase in government spending that saw capital investment expand by 2.4 percent on the previous quarter, while construction increased by 1.4 percent.

The benchmark KOSPI index is currently down by more than 8.7 percent year-on-year. /VCG Photo

The benchmark KOSPI index is currently down by more than 8.7 percent year-on-year. /VCG Photo

Concerning data from the first quarter had seen the economy shrink by 0.4 percent as global trade tensions, high unemployment and a domestic manufacturing slowdown weighed on growth.

However, despite the positive second quarter data, Bank of Korea Governor Lee Ju-yeol told lawmakers earlier this week "the economy is in trouble." 

Slowing regional demand for South Korean products like semiconductors and cars has been compounded by recent trade tensions with Japan.

A dispute over compensation dating back to forced labor during the Second World War has seen Japan restrict exports of certain materials to South Korea, including components important to the manufacturing of semiconductors, one of Seoul's most important and lucrative exports.

The Bank of Korea described the tensions with Japan as one of three major risks to the economy in a report published earlier this week, with many analysts further downgrading their growth forecasts for the rest of the year. The other two major risks were identified as China-U.S. trade tensions and the speed of recovery of the global semiconductor industry.

The official growth forecast for the year is 2.2 percent, a figure that was cut last week from 2.5 percent in a sign of growing unease in Seoul.

Authorities also cut the interest rate by 25 basis points to 1.5 percent, marking the first rate reduction in three years in a bid to boost the economy.

Major South Korean companies have reported a string of losses and disappointing quarterly earnings data. The country's second-largest semiconductor manufacturer SK Hynix announced Thursday that its profits slid by 88 percent in the second quarter.