South Korean Economy Records Underwhelming Growth in 2024

Synopsis

The South Korean economy showed weaker-than-expected growth in 2024, affected by declining exports, reduced domestic demand, and ongoing political turmoil. The real GDP growth was recorded at 2 percent, below forecasts, highlighting the challenges in private spending and investment amid a political crisis.

Key Takeaways

Real GDP growth in 2024 was 2 percent.
Export growth surged 6.9 percent compared to last year.
Private spending rose 1.1 percent, less than the previous year's growth.
Facility investment increased 1.8 percent, while construction investment fell 2.7 percent.
Political uncertainties are affecting consumer sentiment.

Seoul, Jan 23 (NationPress) The South Korean economy experienced growth that fell short of expectations last year due to a decline in export growth, weakened domestic demand, and a political crisis, as indicated by central bank data released on Thursday.

The economic growth recorded in the fourth quarter was significantly lower than the projections made by the Bank of Korea (BOK), as political unrest triggered by President Yoon Suk Yeol's unexpected declaration of martial law negatively impacted private spending and investment, according to the central bank.

The real gross domestic product, a crucial indicator of economic performance, rose 2 percent in 2024, as per preliminary figures from the BOK, as reported by Yonhap news agency.

This growth rate was below the bank's forecast of a 2.2 percent increase, although it represented an improvement from last year's 1.4 percent growth.

In 2024, the economy was primarily driven by exports, which surged 6.9 percent compared to the previous year, contrasting with a 3.5 percent year-on-year rise in 2023.

Private consumption increased by 1.1 percent in 2024, a slowdown from the 1.8 percent growth recorded the year before.

Facility investments rose 1.8 percent, while construction investments saw a decline of 2.7 percent.

In the fourth quarter alone, the economy of Asia's fourth-largest nation grew by 0.1 percent on a quarterly basis, falling short of the BOK's 0.4 percent forecast.

Year-on-year, the economy advanced 1.2 percent in the fourth quarter, down from the 1.5 percent increase in the prior quarter.

Exports showed a slight increase of 0.3 percent from the preceding three months in the fourth quarter, whereas imports fell by 0.1 percent.

Private consumption rose by 0.2 percent on a quarterly basis, and government expenditure climbed by 0.5 percent. Facility investment also experienced a 1.6 percent increase.

However, the data revealed a 3.2 percent drop in construction investments.

"Increased political uncertainties have impacted consumer sentiment and private spending. The situation within the construction sector was worse than anticipated," stated BOK official Shin Seung-cheol during a press briefing.

Yoon announced a surprising martial law on December 3, leading to his impeachment by the National Assembly.

Earlier this month, Yoon was arrested and is currently under investigation for allegedly leading an insurrection and abusing his power.

South Korea had been on a path to economic recovery at the start of 2024; however, the momentum has since diminished due to slowing export growth and stagnant domestic demand.