GDP in South Korea decreases by 0.4%

Due to weak private spending and exports, the South Korean economy contracted 0.4% in the fourth quarter compared to the third. It posted negative growth for the first time since the second quarter of 2020, but still managed to meet the Bank of Korea’s (BOK’s) previous 2.6% annual growth target.

Preliminary figures released by the BOK on Thursday showed the nation’s real gross domestic product (GDP) fell 0.4 percent from the third quarter to the fourth. The growth of the economy was negative for the first time in ten quarters. After two quarters of negative growth in the first and second quarters of 2020, Korea’s economy increased for the ninth consecutive quarter, starting in the third quarter. The first, second and third quarters of last year increased 0.6, 0.7 and 0.3 percent, respectively.

However, the Korean economy achieved the BOK’s projected growth rate of 2.6 percent for the full year of 2022. After 4.1 percent in 2021, it is a rising year for the second consecutive year. The effects of COVID-19 caused the Korean economy to shrink 0.7% in 2020. Data showed that private consumption declined 0.4% in the fourth quarter after rising 2.9% and 1.7 % in the second and third quarters, respectively.

More about the Korean economy

Investment in facilities rose 2.3 percent, down from 7.9 percent in the previous quarter. Due to weak demand for chips and chemicals, exports fell 5.8% in the fourth quarter compared to the third quarter. Imports also decreased by 4.6%. By contrast, government spending rose 3.2 percent in the fourth quarter, compared with a 0.1 percent gain in the third quarter. Investment in construction also rose 0.7 percent. In the fourth quarter, net exports contributed 0.6 percentage points and private consumption 0.2 points less to GDP.

By contrast, government spending accounted for 0.6 percentage points of fourth-quarter GDP growth, while construction investment accounted for 0.1 percentage points and facilities investment 0.2 percentage points. In the fourth quarter, production in the construction, agriculture, forestry and fishing sectors increased by 1.9%, 1.5% and 0.8%, respectively. However, manufacturing production decreased again by 4.1%. As business conditions improved, real gross domestic income (GDI) grew 0.1 percent in the fourth quarter. However, the data showed that real GDI for the full year fell 1.1 percent due to worsening business conditions triggered by rising oil prices.