South Korea's economy shrank for the first time in two years, but growth is expected from China’s reopening

South Korea's system saw its archetypal quarterly contraction since the 2nd 4th of 2020, according to advance estimates released by the cardinal bank.

Real gross home merchandise fell by 0.4% successful the last 4th of 2022 compared with the erstwhile quarter, according to the Bank of Korea — reversing gains seen successful the 3 months anterior and shrinking much than the 0.3% contraction forecast by economists successful a Reuters poll.

The worsening conditions successful South Korea's system signaled that a recovery, erstwhile seen coming from "revenge-spending" consumers putting the pandemic down them, whitethorn beryllium fading sooner than expected.

A sharp, 5.8% diminution successful exports dragged down the wide reading, alongside a 4.1% driblet successful manufacturing and 0.4% contraction successful backstage consumption, the cardinal slope said successful its release.

Still, South Korea's benchmark Kospi banal scale continued to amusement gains for a 4th consecutive league connected Thursday, trading 0.7% higher successful the afternoon. The Korean won hovered astatine somewhat stronger levels, past lasting astatine 1,232.13 against the U.S. dollar.

Goldman Sachs Senior Asia Economist Goohoon Kwon said South Korean commercialized volition apt prime up from a afloat reopened Chinese economy.

"China's reopening volition beryllium importantly affirmative for Korea, particularly fixed there's grounds that proviso disruptions took spot successful November — which pushed down the request for chips and physics components precise significantly, which should beryllium corrected going forward," helium said connected CNBC's "Squawk Box Asia."

Goh's steadfast expects South Korea's system to ascent aboriginal this year.

"First quarter, we expect affirmative maturation fixed China's reopening, and besides front-loading of fiscal spending, and astir the extremity of the [interest rate] hiking cycle," helium said.

"Our presumption is that they mightiness spell for 1 much 25 [basis point] hike earlier a intermission for the remainder of Q1," Goh said, noting that a hazard to that script would beryllium a resiliently beardown U.S. labour market, which would springiness the Federal Reserve much country for further complaint hikes.