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Weighed down by the global economic slowdown, South Korea GDP for the fourth quarter of 2022 contracted for the first time in two and a half years, the country’s central bank said on January 26. The country’s export growth fell nearly 10% in December, the third consecutive month of decline.
As per the central bank, South Korea GDP shrank by 0.4% between October to December compared to the previous quarter.
State of South Korea GDP
Official data shows that the country saw losses of 5.8% in exports, and a decline of 0.4% in private consumption, while government spending rose 3.2% during the said quarter. However, the central bank said South Korea’s GDP for the full year was up 2.6%, compared to a growth of 4.1% in 2021.
Going into 2023, the central bank expects full-year GDP of around 1.7%, but it is likely that there might be a downgrade.
South Korea seems to be suffering the brunt of a global economic slowdown which has dented its exports, as overseas demand for goods reduced due to interest rate hikes around the world. Meanwhile, domestic demand has returned to normal after a spike coming out of Covid-19.
“We think the impact of the cumulative interest rate increases has begun to slow down private consumption. As monthly activity data showed, construction and investment increased mainly due to the completion of pre-ordered projects, but we expect both to decline this quarter,” says ING.
However, the government seems to be downplaying the South Korea GDP contraction, expecting the country to return to growth in the current quarter. Finance Minister Choo Kyung-ho has pledged support for exporters.
“The government will focus policy resources on reactivating exports and investment, such as pushing ahead with deregulation efforts and offering tax and financial support,” Choo said.
However, ING is not as optimistic about the growth in South Korea’s economy, “We still think that GDP for this quarter will contract or at best stagnate. The contribution to net exports is expected to improve mainly due to a sharper decline in imports, but domestic demand is expected to worsen.”
