Seoul, September 5, 2024 — South Korea’s economy saw a contraction in the second quarter of 2024, with the country’s actual gross domestic product (GDP) declining by 0.2% compared to the previous quarter, according to preliminary figures released by the Bank of Korea (BOK).
This marks the first negative growth in the country’s GDP since the fourth quarter of 2022, where it had contracted by 0.5%. The 1-year and 6-month gap since the last negative growth highlights the challenges the South Korean economy has faced in the face of global economic uncertainties and domestic policy adjustments.
Detailed Analysis of Economic Components
Breaking down the contributing factors to the GDP contraction, the export sector experienced a slight increase of 1.2% in the quarter. However, this growth was overshadowed by the rapid rise in imports, particularly for crude oil, natural gas, and petroleum products, which grew by 1.6%. Government spending on consumption rose by 0.6%, but it was not enough to counterbalance the decrease in resident consumption, which fell by 0.2%, and the contraction in business investments, with equipment investment declining by 1.2% and construction investment by 1.7%.
Impact on Various Sectors
In terms of industry sectors, agriculture, forestry, and fisheries showed a growth rate of 4.4%, while the manufacturing sector expanded by 0.8%. Conversely, the construction industry and the sector for electricity, gas, and water supply saw declines of 6% and 1%, respectively. The service industry remained flat, with a growth rate of 0%, reflecting the economic slowdown across various sectors.
Nominal vs. Actual GDP
The nominal national income (GNI) for the quarter increased by 0.9% on a quarterly basis, while the actual GNI decreased by 1.4%. This disparity between nominal and actual GDP indicates the impact of inflation on the real purchasing power of South Koreans.
Economic Challenges and Policy Responses
The South Korean government and central bank have been closely monitoring the economic indicators and adjusting policies to stimulate growth. With the contraction in the second quarter, policymakers are likely to focus on increasing consumer and business confidence, encouraging investment, and supporting industries that have been hit the hardest, such as construction and manufacturing.
Global Context
The South Korean economy, like many others around the world, is facing challenges posed by geopolitical tensions, supply chain disruptions, and the lingering effects of the global pandemic. The contraction in the second quarter of 2024 adds to the ongoing efforts by South Korea to navigate through these global economic headwinds and maintain economic stability.
Conclusion
South Korea’s preliminary GDP figures for the second quarter of 2024 highlight the delicate balance between export growth and import pressures, alongside a slowdown in domestic consumption and investment. The contraction in GDP, following the previous quarter’s decline, underscores the economic challenges and the need for continued policy adjustments to support growth and stability in the face of global economic uncertainties.
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