Q1 Economic Growth Slows to 0.6%... Retreat Except for Exports (Comprehensive)

0.1 Percentage Point Decrease Compared to Preliminary Data
Per Capita GNI Increases for the First Time in 3 Years

[Asia Economy reporters Seo So-jeong and Moon Je-won] 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 a 0.1 percentage point decline from the preliminary figure announced in April. Although exports showed an increasing trend, private consumption and construction investment all declined. On the other hand, South Korea's per capita Gross National Income (GNI) exceeded $35,000 last year, marking a return to growth after three years.

The Bank of Korea announced on the 8th 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 fell 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 dropped again to 0.6% in the first quarter of this year, roughly half the previous quarter's growth. The first quarter growth rate is also 0.1 percentage point lower than the preliminary figure (0.7%) released in April.

Looking at expenditure items, all categories except exports showed a decline. Private consumption decreased by 0.5% compared to the previous quarter as semi-durable goods such as clothing and durable goods like furniture and communication devices all declined. Government consumption remained at a similar level to the previous quarter, while construction investment and facility investment both fell by 3.9%.

On the other hand, exports increased by 3.6%, centered on semiconductors and chemical products. Although exports served as a growth pillar, concerns have been raised that exports may also be hit in the future due to the prolonged Ukraine crisis and ongoing lockdown measures in China, on which the Korean economy heavily depends. The U.S.'s high-intensity tightening policy and inflation rates exceeding 5% are also likely to hamper growth.

Hwang Sang-pil, director of the Economic Statistics Bureau at the Bank of Korea, said in this regard, "If the economy grows by just 0.5% quarter-on-quarter arithmetically, achieving the Bank of Korea's forecasted 2.7% economic growth rate for this year seems possible." He added, "Although exports may slow due to the slowdown in major countries' growth, private consumption is expected to continue recovering thanks to the easing of quarantine measures and supplementary budgets."

Meanwhile, South Korea's per capita Gross National Income (GNI) surpassed $35,000 last year due to factors such as the annual average decline in the won-dollar exchange rate. The per capita GNI was $35,375 (40,482,000 KRW), an increase of 10.5% from the previous year, and a 7.2% increase in won terms. South Korea's per capita GNI first crossed $30,000 in 2017, declined during 2019-2020, and then increased again last year, marking a return to growth after three years. Per capita GNI is a statistic that divides the total income earned by nationals domestically and abroad by the population and is used as an indicator of the living standards of a country's citizens.

Per capita household gross disposable income (PGDI), which is income that households can freely use for consumption or savings, was $19,501 (22,317,000 KRW), an increase of 8.6% from the previous year. In won terms, it increased by 5.3%. Additionally, last year's provisional real GDP growth rate was 4.1% annually, the highest level in 11 years since 2010 (6.8%).

Director Hwang said, "Despite the spread of COVID-19 last year, global economic activities resumed as vaccination expanded mainly in advanced countries." He added, "South Korea's exports increased significantly, and domestically, economic agents adapted to the COVID-19 situation. With the expansion of vaccinations, private consumption increased, showing a rapid recovery that greatly exceeded the negative growth rate of 2020."

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