South Korea's Q1 Economic Growth Rate at 1.6%... Recovery to Pre-COVID Levels (Comprehensive)

Increase in Private and Government Consumption and Facility Investment
Export Growth Rate Slows Down

[Image source=Yonhap News]

[Asia Economy Reporters Eunbyeol Kim, Sehee Jang] South Korea's economic growth rate in the first quarter rebounded more sharply than expected. Both private consumption and government consumption, which were negative (-), turned positive, and facility investment increased significantly.

On the 27th, the Bank of Korea announced that the real Gross Domestic Product (GDP, preliminary figure) growth rate for the first quarter was 1.6% compared to the previous quarter. GDP, which converts goods and services produced domestically into market prices, is an indicator that gauges South Korea's economic growth trend. After recording negative growth rates in the first and second quarters of last year, it has shown positive growth for three consecutive quarters.

As a result, the first quarter GDP at market prices reached 470.8467 trillion won (seasonally adjusted series), surpassing the 468.8143 trillion won recorded in the fourth quarter of 2019. This means that the GDP level, which was eroded by the COVID-19 shock, has been recovered for the time being.

The simultaneous increase in private consumption and government consumption rapidly boosted the growth rate. Private consumption, which had fallen to -1.5% in the fourth quarter of last year, increased by 1.1%. Private consumption rose mainly in passenger cars, home appliances, and food and beverages.

Government consumption increased by 1.7%, mainly due to spending on goods. The significant increase in government consumption was influenced by the accelerated execution of the first quarter budget.

Both construction investment and facility investment also increased. Construction investment rose by 0.4% due to an increase in building construction, and facility investment increased by 6.6% as both machinery and transportation equipment expanded. Facility investment recorded its highest increase since the third quarter of 2020 (8.1%), showing a significant rise.

However, exports saw a reduced growth rate compared to the fourth quarter of last year. Exports increased by 1.9%, mainly in automobiles and mobile phones, which is 3.5 percentage points lower than the previous quarter. Imports increased by 4.9%, centered on crude oil and chemical products. Imports also rose by 2.4%, driven by machinery, equipment, and primary metal products.

The real Gross Domestic Income (GDI) for the first quarter increased by 1.8% due to improved terms of trade. Real GDI exceeded the real GDP growth rate.

In this regard, experts also predicted that if the COVID-19 situation remains at the current level, a favorable trend can continue. Professor Jun Kyung Ha of Hanyang University’s Department of Economics said, "A 1.6% growth compared to the previous quarter is a considerably high figure," adding, "The base effect from last year's poor performance is partially reflected, so there is a high possibility of maintaining a good trend this year."

He further stated, "If the COVID-19 control situation remains the same in the second quarter, the growth rate will likely be at the first quarter level," and evaluated, "An annual growth rate in the 3% range seems achievable."

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