South Korean Economy Records -0.2% Growth Rate in Q2… Impacted by Increased Imports and Sluggish Private Consumption
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The South Korean economy contracted by 0.2% in the second quarter of this year compared to the previous quarter, marking a halt in its growth trajectory.
According to the preliminary figures for real Gross Domestic Product (GDP) released by the Bank of Korea on the 25th, the growth rate for the second quarter was recorded at -0.2%.
This marks the first quarterly contraction in 1 year and 6 months since the fourth quarter of 2022.
The main reasons for the decline in economic growth in the second quarter were identified as an increase in imports and sluggish private consumption. Exports increased by 0.9%, driven mainly by automobiles and chemical products. However, imports of crude oil and petroleum products rose by 1.2%, reducing the net export contribution.
Net exports, which contributed 0.8 percentage points to growth in the first quarter, actually dragged down the growth rate by 0.1 percentage points in the second quarter.
Private consumption decreased by 0.2% due to weak demand for goods such as passenger cars and clothing.
Facility investment also decreased by 2.1%, mainly due to a decline in machinery such as semiconductor manufacturing equipment.
Construction investment, which had led growth with a 3.3% increase in the first quarter, also fell by 1.1% in the second quarter.
On the other hand, government consumption increased by 0.7%, driven by spending on goods, contributing 0.1 percentage points to the growth rate.
By industry, agriculture, forestry, and fishing recorded the highest growth rate with a 5.4% increase, and manufacturing also increased by 0.7%.
However, construction plummeted by 5.4% due to declines in building and civil engineering construction, and electricity, gas, and water supply decreased by 0.8%.
The service sector remained at the same level as the first quarter despite an increase in transportation, due to sluggish performance in information and communications, wholesale and retail trade, and accommodation and food services.
A Bank of Korea official explained, “The base effect from the substantial growth in the previous quarter influenced the growth rate in the second quarter,” emphasizing that the first half’s growth rate was 2.8% year-on-year, the highest since the first half of 2022.
The official also projected, “If the increase in exports continues and prices stabilize this year, domestic demand will gradually recover, approaching the annual forecast of 2.5% made in May.”
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