S.Korea’s economy grows 2.0% in 2024; Q4 GDP below forecast

Empty shops on the street in Seoul, waiting for new tenants (Courtesy New1 Korea) 

South Korea’s economy expanded 2.0% last year, falling short of the central bank’s forecast on weaker-than-expected growth in the fourth quarter amid dwindling private consumption further subdued by the country’s unexpected local political upheaval.

Gross domestic product in Asia’s fourth-largest economy grew 2.0% in 2024 from the prior year, the Bank of Korea’s preliminary data showed on Thursday.

This is below the central bank’s earlier projection of 2.2% made in November.

The slower-than-expected growth is mainly due to the country’s further softened private consumption and construction sector slump in the last quarter.

The Korean GDP in the October-December period added 1.2% from a year ago, the data showed. The country’s economy grew 3.3%, 2.3% and 1.5% on-year in the previous three quarters, respectively, showing signs of losing steam.

Against the third quarter, it remained unchanged at 0.1%, falling 0.4 percentage point short of the central bank’s projection in November.

Bank of Korea officials at a news briefing to explain its preliminary data about South Korea’s GDP growth in Q4 and 2024 (Courtesy of Yonhap) 

RECESSION CONCERN LOOMS

As the country’s quarterly growth shows no sign of imminent recovery, concerns for a recession grow.

A recession, a significant economic downturn, is generally confirmed after two consecutive quarters of negative economic growth, or a decline in GDP.

After the Korean GDP decreased 0.2% in the second quarter from the prior quarter, it grew 0.1% in the following quarters.

A mere 0.1% growth for the two consecutive quarters stoked fears that the Korean economy could fall into a low growth trap with a prolonged slowdown, some economies said.

But some others shrugged off such concerns as the country’s economy has unexpectedly hit bumps in the last quarter of last year following the sudden local political havoc caused by President Yoon Suk Yeol’s ill-fated martial law decree and the deadly plane crash accident.

(Graphics by Dongbeom Yun) 

HIGH RATE CUT EXPECTATIONS

Korea’s growth at a snail’s pace raised expectations for a policy rate cut by the BOK in February after the central bank surprisingly kept the rate flat at 3.00% earlier this month.

On Monday, the BOK lowered its economic growth forecasts, citing growing economic uncertainties amid political turmoil in the wake of the martial law declaration and US trade protectionism.

It projected that the Korean economy expanded 2.0-2.1% in 2024 and 0.2% or less in the fourth quarter, failing to meet its earlier expectations.
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It also expected the economy to grow 1.6-1.7% in 2025, lower than its previous forecast of 1.9% issued last November. Its latest forecast also fell short of the government’s expectation of 1.8% released on Jan. 2.

“Sentiment among economic entities quickly deteriorated due to the overlapping political uncertainty after an unexpected martial law and the Jeju Air plane crash in December,” the BOK said in its official blog on Monday.

Private consumption expanded 1.1% in 2024, moderating from a 1.8% gain in 2023, while investment in the construction sector shrank 2.7% over the same period after growing 1.5% in the previous year.

The feeble domestic demand offset a 6.9% growth in the country’s exports last year.

By Jin-gyu Kang

josep@hankyung.com

Sookyung Seo edited this article.

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