GDP 'Surprise Rebound' but... Vaccine Risks Raise Concerns (Comprehensive Report 2)

Positive Growth for Third Consecutive Quarter... Exceeding Expectations
Recovery Beyond Pre-COVID Levels... Exports and Domestic Demand Both Driving
Private Consumption Remains a Risk Factor

[Asia Economy Reporters Eunbyeol Kim and Sehee Jang] South Korea's economy grew by 1.6% in the first quarter of this year, recovering to pre-COVID-19 levels. This marks not only three consecutive quarters of growth above 1%, but also significantly exceeds initial expectations.

According to the preliminary figures for "Real Gross Domestic Product (GDP) in the First Quarter of 2021" released by the Bank of Korea on the 27th, the real GDP from January to March this year was 470.8467 trillion won, an increase of 1.6% compared to the previous quarter. Real GDP had contracted due to the impact of COVID-19, with -1.3% in the first quarter and -3.2% in the second quarter of last year. However, it turned positive with 2.1% growth in the third quarter and has maintained growth for three consecutive quarters. Previously, the Bank of Korea analyzed that if the GDP growth rate in the first quarter of this year exceeded 1.3% quarter-on-quarter, GDP could recover to the level of the fourth quarter of 2019.

GDP growth was driven by both exports and domestic demand. As the global economy revived with vaccine rollouts in advanced countries such as the United States, exports increased rapidly, and the previously sluggish private consumption also showed a notable recovery. Private consumption rose by 1.1% quarter-on-quarter, driven by increases in durable goods such as passenger cars and home appliances, as well as non-durable goods like food and beverages. Government consumption also increased by 1.7% as budget execution accelerated.

Both construction investment and facility investment increased. In particular, the increase in facility investment recorded 6.6%, the highest since the third quarter of 2020 (8.1%).

Real Gross Domestic Income (GDI) in the third quarter rose by 1.8% due to improved terms of trade. Real GDI outpaced the growth rate of real GDP.

Hong Nam-ki, Acting Prime Minister and Deputy Prime Minister for Economy, stated on social media (SNS) that "Our economy is expected to surpass the initial forecast of 3.2% and move toward mid-to-high 3% growth."

However, caution remains regarding future growth. The supply of COVID-19 vaccines, which will determine economic growth, remains uncertain. Park Yang-su, Director of the Economic Statistics Bureau at the Bank of Korea, said, "If restrictions on business operations are strengthened due to a resurgence of COVID-19, the consumption sector of face-to-face service industries is expected to be affected," adding, "The private consumption sector remains a risk factor."

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