Despite the shock of the Middle East war
Export, consumption, and investment indicators all improved
In the first quarter of this year, the Korean economy posted a surprising 1.7% growth.
Bank of Korea's February forecast of 0.9% was significantly exceeded... Highest level in five and a half years
The Bank of Korea announced on the 23rd that the preliminary real gross domestic product (GDP) growth rate for the first quarter
grew by 1.7% compared to the previous quarter.
This figure significantly surpasses the Bank of Korea’s forecast of 0.9% released in February,
marking the highest level in five and a half years since the third quarter of 2020 (2.2%).
Rebounded to 1.3% in the third quarter after negative growth in Q1 last year... but contracted again in Q4
This growth rate is significant as it far exceeded market expectations despite the effects of the Middle East war that began at the end of February.
The Korean economy fell into negative territory at -0.2% in the first quarter of last year,
then rebounded by 0.7% in the second quarter and 1.3% in the third quarter, raising hopes for recovery.
However, it contracted again in the fourth quarter at -0.2%,
barely achieving annual growth of 1%.
Strong increase in semiconductor exports... Construction and facility investment also turned positive
The rise in this quarter’s growth rate was driven by the broad improvement in exports, private consumption,
and investment indicators.
In particular, exports showed strong growth led by semiconductors,
while construction and facility investments turned positive, partly due to base effects,
which contributed to the increase in the growth rate.
Exports, mainly of IT products such as semiconductors, increased by 5.1% compared to the previous quarter.
This was a significant improvement in just one quarter from the negative growth in the fourth quarter of last year.
Imports also rose by 3.0%, driven by increases in machinery, equipment, and automobiles.
Continued recovery in domestic demand led by private consumption
Domestic demand continued its recovery, driven mainly by private consumption,
while both construction and facility investment returned to an upward trend.
Private consumption increased by 0.5% from the previous quarter, led by growth in goods such as clothing.
Government consumption increased by 0.1%, mainly due to higher spending on goods.
Construction investment also rose by 2.8% during the same period, driven by increases in building and civil engineering projects.
Facility investment increased by 4.8%, as both machinery and transportation equipment saw gains.
Both indicators rebounded in just one quarter after declines of -3.5% and -1.7% respectively in the fourth quarter of last year.
Looking at the contribution by expenditure component in the first quarter, the rebound in exports was particularly notable.
The contribution of net exports (exports minus imports) to growth was 1.1%,
reversing from -0.2 percentage points in the previous quarter.
Although imports rose by 1.2 percentage points,
exports increased by 2.4 percentage points, making a larger contribution to growth.
The contribution of domestic demand to growth rebounded from 0 percentage points in the fourth quarter of last year
to 0.6% in the first quarter.
In particular, construction and facility contributed 0.3 and 0.4 percentage points respectively, boosting domestic demand’s contribution.
By economic agent, private consumption (1.7 percentage points) contributed more than the government (0 percentage points).
Both construction and manufacturing grew by 3.9%
By industry, both manufacturing and construction showed clear improvement.
Manufacturing increased by 3.9% compared to the previous quarter, led by computers, electronics, and optical devices.
Construction also grew by 3.9%, as both building and civil engineering projects increased.
The electricity, gas, and water industries grew by 4.5%, mainly due to increases in water supply and raw material recycling.
All of these sectors returned to growth in just one quarter after being negative in the fourth quarter of last year.
In the service sector, finance and insurance, as well as culture and other industries, led to a 0.4% increase.
In the third quarter, real gross domestic income (GDI)
increased by 7.5% compared to the previous quarter, far exceeding GDP growth.
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