Seoul: The South Korean economy posted weaker-than-expected growth last year amid slowing export growth, sagging domestic demand, and a political crisis, central bank data showed Thursday. The economic expansion in the fourth quarter also came far below the earlier forecast by the Bank of Korea (BOK) as political turmoil sparked by President Yoon Suk Yeol's shocking martial law declaration dented private spending and investment, according to the central bank.
According to Yonhap News Agency, the country's real gross domestic product, a key measure of economic growth, increased 2 percent in 2024, according to preliminary data from the BOK. The 2024 figure was lower than the central bank's forecast of a 2.2 percent expansion, though the growth accelerated from a 1.4 percent advance in 2023. Last year's growth was led by exports, which surged 6.9 percent from a year earlier, compared with a 3.5 percent on-year increase in 2023. Private spending rose 1.1 percent in 2024, slower than a 1.8 percent growth the previous year. Facility investment gained 1.8 percent, while construction investment fell 2.7 percent.
In the fourth quarter alone, Asia's fourth-largest economy advanced 0.1 percent on-quarter, far lower than the BOK's forecast of a 0.4 percent growth. On a yearly basis, the economy grew 1.2 percent in the fourth quarter, slowing from the previous quarter's 1.5 percent gain. Exports inched up 0.3 percent from three months earlier in the fourth quarter, while imports shed 0.1 percent. Private consumption added 0.2 percent on-quarter, and government spending rose 0.5 percent. Facility investment also climbed 1.6 percent. However, construction investment dropped 3.2 percent, the data showed.
"Heightened political uncertainties affected consumer sentiment and private spending. The situation of the construction industry was worse than expected," BOK official Shin Seung-cheol stated during a press briefing. Yoon declared a shocking martial law on Dec. 3, and the National Assembly voted to impeach him. Yoon was arrested earlier this month and has come under investigation on charges of leading an insurrection and committing abuse of power.
South Korea had been on an economic recovery track at the beginning of 2024, but momentum has weakened as the growth of exports has slowed and domestic demand remained in the doldrums. The economy expanded 1.3 percent from three months earlier in the first quarter but contracted 0.2 percent in the second quarter before barely growing 0.1 percent in the third quarter. The BOK earlier presented a 1.9 percent growth outlook for the South Korean economy in 2025, which is widely expected to be lowered further.
"Weak domestic demand and the construction industry slump are expected to continue through the first quarter of this year," Shin said, citing a potential extra budget and policy changes under the new Donald Trump administration as major factors that will affect the economy down the road.