Q4 GDP Growth Rate at 0.1% Last Year...Below Expectations (Update)

Due to the shock of martial law, the South Korean economy grew by 0.1% in the fourth quarter of last year. This was influenced by a slowdown in investment and a contraction in private consumption. The annual growth rate was recorded at 2.0%.

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The Bank of Korea announced on the 23rd that the real Gross Domestic Product (GDP) growth rate for the fourth quarter of last year (preliminary figure) rose by 0.2% compared to the previous quarter. Compared to the same period last year, it increased by 1.2%.

The South Korean economy showed a surprising growth of 1.3% in the first quarter of last year, continuing a growth streak for five consecutive quarters from 2023, but turned negative in the second quarter (-0.2%) and recovered to 0.1% in the third quarter.

Initially, the Bank of Korea forecasted a 0.5% growth for the fourth quarter in November last year, expecting an expansion. However, due to martial law and the resulting economic uncertainty, on the 20th it revised the forecast, stating that "the fourth quarter growth rate is likely to fall significantly short of the initial expectation of 0.2% or slightly below that."

Looking at the growth rate by sector for the fourth quarter of last year, the growth rates of private and government consumption and facility investment all shrank. Construction investment recorded negative growth for three consecutive quarters.

Private consumption increased by 0.2%, centered on semi-durable goods such as clothing and footwear, and services such as medical care and education. Government consumption increased by 0.5%, mainly due to social security benefits such as health insurance benefits.

Construction investment decreased by 3.2%, with both building construction and civil engineering declining. Facility investment increased by 1.6%, mainly in machinery such as semiconductor manufacturing equipment.

Exports increased by 0.3%, centered on IT items such as semiconductors, while imports decreased by 0.1%, due to reductions in automobiles and crude oil.

Yonhap News

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By industry, agriculture, forestry, and fisheries decreased by 3.9%, mainly in crop farming. Manufacturing increased by 0.1%, with decreases in metal processed products but increases in chemicals, chemical products, computers, electronics, and optical devices.

Electricity, gas, and water supply decreased by 2.9%, mainly in gas, steam, and air conditioning supply. Construction decreased by 3.5%, with declines in both building construction and civil engineering.

The service industry increased by 0.3%, despite declines in wholesale, retail, and accommodation and food services, due to increases in finance and insurance, medical care, health, and social welfare services.

Real Gross Domestic Income (GDI) in the fourth quarter of last year increased by 0.6% compared to the previous quarter, surpassing the GDP growth rate.

The annual GDP growth rate for last year was recorded at 2.0%. The Bank of Korea's forecast in November last year was 2.2%. Government consumption, facility investment, and exports expanded their growth, but private consumption slowed and construction investment turned negative. By industry, manufacturing expanded its growth, but the service industry’s growth slowed and construction turned negative.

Real Gross Domestic Income (GDI) increased by 3.9% compared to the previous year. The Bank of Korea explained that this exceeded the real GDP growth rate (2.0%) due to improved terms of trade compared to the previous year.

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