Q2 Economic Growth Rate 0.7%... Private Consumption Rises Amid Export Slump

Busan Port Sinsundae and Gammam Pier
[Image source=Yonhap News]

Despite a sharp decline in exports due to the Ukraine crisis and global supply chain disruptions, the Korean economy grew by 0.7% in the second quarter as private consumption increased.

On the 26th, the Bank of Korea announced that the real gross domestic product (GDP) growth rate for the second quarter of this year (preliminary figure, quarter-on-quarter) was 0.7%.

The quarterly growth rates maintained a positive trend for eight consecutive quarters following negative growth in the first (-1.3%) and second (-3.0%) quarters of 2020, when COVID-19 spread. The growth rates were 2.3% in the third quarter, 1.2% in the fourth quarter of 2020, 1.7% in the first quarter, 0.8% in the second quarter, 0.2% in the third quarter, 1.3% in the fourth quarter of 2021, and 0.6% in the first quarter of this year.

Looking at the second quarter growth by sector, exports decreased while private consumption and government consumption increased.

Private consumption rose by 3.0%, driven by increased spending on semi-durable goods such as clothing and footwear, as well as services including food, accommodation, entertainment, and culture.

Government consumption increased by 1.1%, mainly due to social security in-kind benefits.

Construction investment grew by 0.6%, while facility investment declined by 1.0% due to a decrease in transportation equipment.

However, exports fell by 3.1%, centered on chemical products and primary metal products, and imports decreased by 0.8%, mainly due to reduced crude oil and natural gas imports.

Exports had supported GDP growth by growing for three consecutive quarters?from a 0.7% decline in the second quarter of last year to growth of 1.1% in the third quarter, 3.2% in the fourth quarter, and 3.6% in the first quarter of this year?but turned downward this time due to supply chain instability and other factors.

By industry, manufacturing declined while the service sector showed growth.

Agriculture, forestry, and fisheries (-6.4%), manufacturing (-1.1%), electricity, gas, and water supply (-0.5%), and finance and insurance (-3.3%) decreased, while transportation (9.8%), culture and others (9.0%), and wholesale, retail, accommodation, and food services (2.2%) increased.

With the lifting of COVID-19 social distancing measures, growth centered on the service sector expanded.

Although the Bank of Korea’s growth target for the first half of the year (2.8%) was achieved, many forecasts suggest that it will be difficult to meet the annual growth target as a global economic recession may intensify.

Real gross domestic income (GDI) decreased by 1.0% due to worsening terms of trade despite the increase in GDP.

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