South Korea's Economic Performance in 2024

In a surprising turn of events, South Korea's economy grew by a mere 0.1 percent in the fourth quarter of 2024, a figure that starkly contrasts with the Bank of Korea's (BOK) earlier forecast of 0.5 percent growth. This sluggish performance was primarily due to weakened domestic consumption and construction investment, further aggravated by the aftermath of the December 3 martial law crisis.

Annual Growth Figures and Sectoral Breakdown

The BOK's preliminary figures revealed that the real GDP grew by 2.0 percent for the entire year of 2024, falling short of the November forecast by 0.2 percentage points. The quarterly growth rates painted a fluctuating picture, with a notable surge in the first quarter followed by a dip into negative territory in the second quarter, and a narrow avoidance of contraction in the subsequent quarters.

Breaking down the fourth quarter's growth, private consumption saw a modest rise, driven by semi-durable goods and services. Facility investment also increased, albeit at a reduced pace compared to the previous quarter. However, construction investment experienced a sharp decline, significantly impacting the overall growth figures.

Impact of External and Internal Factors

Exports showed a slight increase, led by the semiconductor sector, while imports saw a minor decrease. The net exports contributed positively to the growth, recovering from a negative impact in the previous quarter. However, the martial law crisis's effects on domestic demand resulted in a neutral contribution to the overall growth, with construction investment bearing the brunt of the negative impact.

Despite these challenges, the real gross domestic income (GDI) growth rate surpassed the real GDP growth rate, thanks to improved terms of trade compared to the previous year.