Q1 GDP Growth Rate at 0.6%... Down 0.1%p from Preliminary Figure

Bank of Korea Announces Real GDP Growth Rate for Q1

[Image source=Yonhap News]

Due to the spread of COVID-19 and the Ukraine crisis, South Korea's economy grew by only 0.6% in the first quarter. This is 0.1 percentage points lower than the previously announced preliminary figure. Although exports showed an increasing trend, private consumption and construction investment all contracted, resulting in a '0% growth rate.' Concerns are rising that economic uncertainties such as exchange rates may increase due to the U.S.'s tightening measures, potentially weakening growth momentum further.

On the 8th, the Bank of Korea announced that the real Gross Domestic Product (GDP, provisional) growth rate for the first quarter of this year was 0.6% compared to the previous quarter. Quarterly real GDP recorded 1.7% in the first quarter of last year, then declined to 0.8% in the second quarter and 0.2% in the third quarter, before jumping to 1.3% in the fourth quarter. However, it fell back to 0.6% in the first quarter of this year, roughly half the previous peak. The first quarter growth rate is also 0.1 percentage points lower than the preliminary figure (0.7%) released in April.

Looking at the first quarter GDP growth rate by expenditure items, all items except exports showed a downward trend. Private consumption decreased by 0.5% compared to the previous quarter as both semi-durable goods such as clothing and durable goods such as furniture and communication devices declined. Government consumption remained at a similar level to the previous quarter as increased spending on goods was offset by a reduction in social security in-kind benefits. Construction investment fell by 3.9% due to decreases in both building and civil engineering construction, and equipment investment also declined by 3.9% as machinery and transportation equipment contracted.

On the other hand, exports increased by 3.6%, centered on semiconductors and chemical products. Although exports served as a growth pillar, concerns remain that prolonged Ukraine crisis and ongoing lockdown measures in China, on which the Korean economy heavily depends, may negatively impact exports going forward. The U.S.'s high-intensity tightening policy and inflation rates exceeding 5% also pose significant risks to growth. If the won-dollar exchange rate soars due to U.S. tightening, import prices could rise, adversely affecting the Korean economy.

Examining GDP by economic activity, manufacturing increased by 3.3% compared to the previous quarter, driven by computers, electronics, optical devices, and chemical products. Construction decreased by 1.6% due to declines in building and civil engineering construction. The service sector maintained the previous quarter's level as education services increased but transportation services decreased.

Nominal Gross National Income (GNI) in the first quarter increased by 0.9% compared to the previous quarter. Nominal net primary income from abroad rose from 4 trillion won to 6.4 trillion won, surpassing the nominal GDP growth rate (0.5%). The real GNI growth rate (1.0%) also exceeded the real GDP growth rate due to the increase in real net primary income from abroad. The GDP deflator rose by 2.3% year-on-year.

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