SEOUL, March 28 (Reuters) - South Korea’s service sector is expected to grow in the near-term on robust domestic consumption and as the nation’s northeast region enjoys positive momentum from hosting the Winter Olympic Games, the Bank of Korea said on Wednesday.
“First quarter spending in Seoul and the Gangwon Province area were boosted by the Pyeongchang Winter Olympics, driving overall domestic consumption up,” the BOK said in a quarterly report on local economies.
South Korea’s mountain resort town of Pyeongchang in Gangwon Province hosted the Winter Olympics from Feb. 9-25, in a boon for the region’s tourism and service industry in the first quarter.
The report also said exports are expected to expand as global demand for South Korean semiconductors and petroleum goods remains robust.
The bank said the government’s efforts to increase jobs would also boost domestic spending. President Moon Jae-in has proposed a 4 trillion won ($3.73 billion) supplementary budget and increased business subsidies to boost jobs for the youth.
General Motor’s shutdown of one of its plants in South Korea is likely to be a headwind for the local economy, the BOK added, with hundreds of thousands of jobs at stake depending on the loss-making carmaker’s management decisions.
The U.S. automaker said on Tuesday the due diligence in South Korea is “going smoothly” and that the revised trade deal between the two countries would “help ease investment risks”.
Seoul and Washington agreed earlier this week to revise an existing trade pact, with U.S. automakers winning improved market access and Korean steelmakers avoiding hefty tariffs. ($1 = 1,071.2900 won) (Reporting by Dahee Kim; Editing by Sam Holmes)