Meanwhile, tumbling external demand at the beginning of the year affected Korean exports of goods and services. Overseas sales of goods and services were virtually flat in Q1, growing only 0.1% (Q4: +2.5% yoy). On the other side of the balance, imports decelerated notably in the first three months of the year, reflecting slower domestic demand. Imports slowed from a 6.1% increase in Q4 to a 1.5% expansion in Q1. As a result, net exports continued to be a drag on the economy. The deterioration in the external sector subtracted 0.7 percentage points to overall economic growth in the first quarter, which followed a 1.6 percentage-point detraction in Q4.
In April, the Central Bank lowered its growth forecasts for this year and next. The Bank now expects GDP to increase 2.8% 2016, which was downwardly revised from a previous 3.0% projection. For 2017, the Bank now expects growth of 3.0%, which is down from a previous 3.2% expansion. FocusEconomics Consensus Forecast panelists foresee the economy growing 2.6% in 2016, which is down 0.1 percentage points from last month’s estimate. For 2017, the panel projects that the economy will expand 2.8%.