Q2 GDP Growth Rate at 0.7%...Up 0.1 Percentage Point from Breaking Estimate (Update)

Growth Rate Revised Up to 0.7% in Q2
Construction Investment and Exports Rise,
Facility Investment Declines

In the second quarter, the South Korean economy grew by 0.7% compared to the previous quarter. This figure is 0.1 percentage point higher than the preliminary estimate released in July, due to upward revisions in construction investment and export performance.

Yonhap News Agency

The Bank of Korea announced on September 3 that the country's real gross domestic product (GDP) growth rate (provisional) for the second quarter increased by 0.7% compared to the previous quarter.

After experiencing negative growth of -0.2% in the second quarter of last year, the South Korean economy posted only 0.1% growth in both the third and fourth quarters. In the first quarter of this year, the growth rate was again negative at -0.2%, but a recovery trend has been evident since the second quarter.

By sector, all areas-consumption, exports, and imports-showed increases in the second quarter, except for construction and facility investment.

Looking at growth rates by expenditure category, private consumption rose by 0.5% quarter-on-quarter, as spending on goods such as passenger cars and services such as healthcare increased. Government consumption grew by 1.2%, mainly due to higher health insurance benefit expenditures.

In contrast, construction investment decreased by 1.2%, mainly due to a decline in civil engineering construction. Facility investment fell by 2.1%, as investment in transportation equipment such as ships and machinery for semiconductor manufacturing declined.

Exports increased by 4.5%, driven by semiconductors and petroleum and chemical products. Imports rose by 4.2%, mainly due to higher imports of energy products such as crude oil and natural gas.

Compared to the preliminary figures, construction investment (up by 0.4 percentage point), investment in intellectual property products (up by 1.1 percentage points), and exports (up by 0.4 percentage point) were revised upward, while facility investment was revised downward by 0.6 percentage point.

In terms of contribution to second-quarter growth by expenditure item, domestic demand-including consumption and investment-contributed 0.4 percentage point, while net exports (exports minus imports) contributed 0.3 percentage point. Considering that domestic demand dragged down growth by 0.5 percentage point in the first quarter, the recovery in domestic demand was clear.

By category, private consumption shifted to a positive contribution of 0.2 percentage point, while construction and facility investment pulled down growth by -0.1 percentage point and -0.2 percentage point, respectively. Exports shifted to a positive contribution of 2.0 percentage points, and imports contributed 1.7 percentage points.

By industry, manufacturing grew by 2.5% quarter-on-quarter, driven by computers, electronics, and optical equipment. The construction sector contracted by 3.6%, mainly due to declines in building and civil engineering construction. The service sector expanded by 0.8%, as increases in wholesale and retail, accommodation and food services, and transportation offset a decline in information and communications.

In the second quarter, real gross national income (GNI) increased by 1.0% quarter-on-quarter. Although real net factor income from abroad decreased, improved terms of trade led to a reduction in real trade losses, resulting in GNI growth outpacing GDP growth. Real GNI reflects the real purchasing power earned by South Koreans both domestically and abroad. An increase in real GNI indicates that the economic capacity of the population has grown.

The GDP deflator, an index representing the overall price level in the country, rose by 2.8% year-on-year. The gross national saving rate in the second quarter was 35.6%, up 0.7 percentage point from the previous quarter, while the gross domestic investment rate fell by 0.1 percentage point to 28.8%.