0.3% Relief... Negative Growth Avoided Thanks to Private Consumption

Bank of Korea Announces Q1 Growth Rate
Recovery from Last Year's Q4 Negative
IT Slump and Delayed Effect of China Reopening
Annual Growth Rate of 1.6% Seems Difficult

South Korea's economy grew by 0.3% in the first quarter of this year as private consumption revived following the end of COVID-19 social distancing measures. While the slight positive growth in Q1 narrowly avoided a second consecutive quarter of contraction after Q4 last year (-0.4%), ongoing weakness in the IT sector and delayed effects of China's reopening (resumption of economic activities) suggest that achieving the annual growth forecast of 1.6% this year will be challenging.

On the 25th, the Bank of Korea announced that the real gross domestic product (GDP) growth rate for the first quarter of this year (preliminary figure, quarter-on-quarter) was 0.3%. The quarterly growth rate of the Korean economy had recorded a negative figure for the first time in 10 quarters since Q2 2020 (-3.0%), when the impact of COVID-19 became pronounced, but returned to positive territory in Q1 this year.

Quarterly growth rates showed negative figures in Q1 2020 (-1.3%) and Q2 2020 (-3.0%) during the spread of COVID-19, followed by nine consecutive quarters of growth. However, exports sharply declined in Q4 last year, turning the economy into contraction (-0.4%), and it rebounded in Q1 this year thanks to private consumption.

Looking at the Q1 growth rate by sector, facility investment decreased while private consumption and others increased. Private consumption rose by 0.5%, mainly driven by service consumption such as entertainment, culture, food, and accommodation. Government consumption increased by 0.1%, and construction investment grew by 0.2%, centered on building construction. On the other hand, facility investment fell sharply by 4.0%, due to a decrease in machinery such as semiconductor equipment.

Exports increased by 3.8%, mainly in transportation equipment such as automobiles, while imports rose by 3.5%, driven by chemical products and others.

By industry, the service sector slightly declined, but manufacturing and construction showed growth. Agriculture, forestry, and fisheries decreased by 2.5%, mainly in crop farming, while manufacturing increased by 2.6%, led by transportation equipment and primary metal products. Electricity, gas, and water supply decreased by 2.0%, centered on gas, steam, and air conditioning supply. Construction grew by 1.8%, mainly in building construction.

The service sector saw increases in medical and health services, social welfare services, and cultural and other services, but decreases in wholesale and retail, accommodation and food services, and transportation, resulting in an overall decline of 0.2%.

Real gross domestic income (GDI) in Q1 rose by 0.8%, surpassing the real GDP growth rate.

Shin Seung-cheol, Director of the Economic Statistics Bureau at the Bank of Korea, said, "With the IT sector recovery delayed and the effect of China's reopening postponed, the annual growth forecast for this year (1.6%) is likely to be slightly revised downward," adding, "We plan to announce a revised forecast in the May survey to reflect recent changes in the economic situation."

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