According to the article, in Q4 of 2014, the fourth largest economy in Asia and critical U.S. trading partner, South Korea, experienced a significant drop in GDP growth rates, to 0.4% from Q3's 0.9%. This fell well short of projected Q4 growth of 2.7% due to falling infrastructure spending and a drop in the quantity of South Korean exports. This drop in spending was due to weakening tax revenues cutting the tax base available for investment. This below-projection data may force the South Korean central bank, the Bank of Korea, to continue cutting interest rates, when it next meets in February. (http://www.bbc.com/news/business-30945571)
This could have wider implications for the economies of southeast Asia and be an indicator of economic problems to hit the region. The region has grown rapidly in terms of GDP since about 1985, and only recently appears to be slowing in terms of economic growth: China and Japan have both posted less-positive economic indicators, and economists have indicated concerns over the stability of the tax base in southeast Asia, in addition to various economic bubbles, which could lead to collapsing confidence in the regional economy, stunting continuing growth and leading to longer-term economic headaches for economic planners in the region.
1 comment:
The good thing is that South Korea still has room to lower interest rates to help boost the economy. These lower interest rates me recover some of the tax revenues that were lost and lead to lower construction expenses. Maybe the south Korean government can reach out to private investors for construction spending.
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