Q2 GDP Growth Rate at 0.6%... Rebound in Consumption Ends Negative Streak (Update)

Bank of Korea Announces Preliminary Q2 Real GDP Figures
Domestic Demand Recovers, Exports Rebound...
Growth Exceeds Forecast of 0.5%

With the recovery of private consumption and an increase in semiconductor exports, the South Korean economy grew by 0.6% in the second quarter of this year.

Yonhap News Agency

The Bank of Korea announced on the 24th that the preliminary real gross domestic product (GDP) growth rate for the second quarter rose by 0.6% compared to the previous quarter. This slightly exceeds the Bank of Korea’s forecast of 0.5% released in May and marks the highest growth in five quarters since the first quarter of last year (1.2%).

This growth rate is significant in that it breaks the cycle of low growth that has continued since the second quarter of last year. After a surprise growth in the first quarter of last year, the South Korean economy plunged to -0.2% in the second quarter, and then recorded only 0.1% growth in both the third and fourth quarters, continuing the low growth trend. In the first quarter of this year, the economy returned to negative growth, maintaining sluggish performance.

The increase in the growth rate is attributed to improvements in both exports and domestic demand. Exports rebounded, led by semiconductors, while domestic demand contributed to growth, centered on private and government consumption. Exports increased by 4.2%, driven by semiconductors and petroleum and chemical products. This represents a significant improvement in just one quarter from negative growth in the first quarter. Imports also rose by 3.8%, mainly due to energy products such as crude oil and natural gas. Imports, which had contracted by -1.1% in the first quarter of last year, also returned to an upward trend.

In terms of domestic demand, although construction investment remained sluggish, consumption showed a moderate recovery. Private consumption increased by 0.5% quarter-on-quarter, with growth in both goods such as passenger cars and services such as entertainment and culture. Government consumption also rose by 1.2%, mainly due to increased health insurance benefit payments. However, construction investment decreased by 1.5% compared to the previous quarter, as building and civil engineering construction declined, marking the fifth consecutive quarter of negative growth. Facility investment also dropped by 1.5%, as investments in machinery such as semiconductor manufacturing equipment and transportation equipment such as ships decreased.

Looking at the contribution to growth by expenditure item in the second quarter, the rebound in domestic demand is clear. The contribution of domestic demand to growth rebounded from -0.5 percentage points in the first quarter to 0.3 percentage points in the second quarter. Private consumption (0.2 percentage points) and government consumption (0.2 percentage points) were the main contributors to the increase in domestic demand’s contribution. The net export (exports minus imports) contribution was 0.3 percentage points. By economic agent, the private sector contributed 0.5 percentage points to GDP growth, while the government contributed 0.1 percentage points.

By industry, both manufacturing and services showed clear improvement. Manufacturing increased by 2.7%, mainly due to computers, electronics, and optical equipment. The service sector grew by 0.6%, as declines in information and communications were offset by increases in wholesale and retail, accommodation and food services, and real estate. In contrast, construction contracted by 4.4% as both building and civil engineering construction decreased. The agriculture, forestry, and fisheries sector declined by 1.4%, mainly due to fisheries, and the electricity, gas, and water supply sector fell by 3.2%, mainly due to electricity.

In the first quarter, real gross domestic income (GDI) increased by 1.3% compared to the previous quarter, outpacing the GDP growth rate.

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