'Tax-Led Growth' Also Reaches Its Limit... Last Year's Growth Rate 2.0%, Lowest in 10 Years

Private Sector Struggled Despite Government Support... Last Year's Growth Rate at 2.0%

Lowest Real GDP Growth Rate in 10 Years Since 2009's 0.8%

[Image source=Yonhap News]

[Asia Economy Reporters Sim Nayoung, Kim Eunbyul] Last year, South Korea's real Gross Domestic Product (GDP) growth rate fell to its lowest level in 10 years. Despite the government’s massive tax spending, export growth sharply contracted, investment declined, and private consumption was sluggish.

According to the Bank of Korea’s announcement on the "2019 Q4 and Annual Real GDP (Preliminary)," last year’s annual growth rate was recorded at 2.0% compared to the previous year. To two decimal places, it was 2.01%. This is the lowest level in 10 years since the 0.8% real GDP growth rate in 2009, right after the global financial crisis.

The reason for the plunge in last year’s economic growth rate was the weakness across all private sectors except government consumption. Private consumption fell to 1.9%, the lowest in six years (1.7% in 2013). Facility investment dropped by -8.1%, marking the lowest since -8.1% in 2009. Construction investment was -3.3%, which improved from -4.3% in 2018 but still remained in negative territory.

Last year’s export growth rate was 1.5%, the lowest in four years since 0.2% in 2015. Import growth rate was -0.6%, the lowest in 10 years since -7.2% in 2009.

Unlike the struggling private sector, government consumption recorded its highest growth rate in 10 years. Last year, government consumption growth was 6.5%, the highest level since 6.7% in 2009.

Professor Sung Tae-yoon of Yonsei University’s Department of Economics evaluated, "Looking at only the private indicators last year, achieving this year’s economic growth rate of 2.0% seemed challenging, but it appears that government fiscal spending played a very significant role in preventing the growth rate from falling below 2%."

This content was produced with the assistance of AI translation services.