First quarter growth rate of 1.3%… Escape from ‘0% level’ after 2 years

2024-04-25 20:23:29

Exports-construction investment-private consumption revives

In the first quarter of this year (January to March), the Korean economy broke the cycle of low growth in the 0% range and achieved a ‘surprising rebound’. Exports of semiconductors and automobiles increased significantly, and construction investment and private consumption revived, significantly exceeding market expectations.

According to the Bank of Korea on the 25th, real gross domestic product (GDP) in the first quarter of this year increased by 1.3% compared to the previous quarter. This is the highest growth rate in two years and three months since the fourth quarter of 2021 (October to December, 1.4%). The market expected the growth rate to slightly exceed 0.6% in the fourth quarter of last year, but thanks to the recovery of exports and domestic demand, the quarterly growth rate of 0% that had continued since the first quarter of 2022 (0.7%) was broken.

The rebound in growth rate was largely due to the revival of the domestic economy, which had been a concern. Construction investment increased by 2.7% as building and civil engineering construction simultaneously recovered. While private consumption increased by 0.8% compared to the previous quarter, government consumption also increased by 0.7%. Exports also showed a steady recovery. In the first quarter of this year, exports increased by 0.9%, led by information technology (IT) items such as smartphones, driving the growth rate.

The private sector leads growth… Government: “This year’s growth rate is likely to exceed 2.2%”

[경제 이슈]
First quarter growth rate highest in 27 months
Some say, “Korea’s growth rate is expected to be 2.3% this year”
Prolonged high interest rates – variables such as the Middle East crisis

Due to the ‘surprising growth’ of the Korean economy in the first quarter of this year (January to March), domestic and foreign institutions are raising their growth forecasts for this year. Although there is a ‘rosy outlook’ due to strong exports and a rebound in the domestic economy, there are concerns that the growth rate may decline again due to external variables such as the prolonged high interest rates from the United States.

Deputy Prime Minister and Minister of Strategy and Finance Choi Sang-mok, who presided over the Foreign Economic Ministers’ Meeting on the 25th, said, “For the first time in a long time, a ‘clear green light’ has been given to our economic growth path.” It achieved private-led growth and showed a balanced recovery in which the rebound in domestic demand, including consumption, construction, and investment, in addition to robust exports, contributed evenly.

The government predicted that this year’s annual growth rate is likely to exceed the previous government forecast (2.2%). An official from the Ministry of Strategy and Finance said, “The 1.3% growth rate achieved in the first quarter of this year is the basis for the judgment that the economic recovery is in full swing,” and added, “This year’s economic growth rate may be on a path from the low 2% range to the low to mid 2% range.” There is speculation that the Bank of Korea may also raise its existing annual growth rate forecast (2.1%) when announcing its revised economic outlook next month.

The Association of Southeast Asian Nations (ASEAN) and the ASEAN+3 Macroeconomic Research Organization (AMRO), an international organization that analyzes the economies of Korea, China, and Japan, also predicted that the Korean economy will grow by 2.3% this year.

Thanks to the steady recovery in exports, the perceived economic performance of domestic companies is also improving. The Business Survey Index (BSI) for all industries in April announced by the Bank of Korea on this day was 71, up 2 points from the previous month, showing an upward trend for the second consecutive month.

However, the aftermath of prolonged high interest rates from the United States and the escalation of the Middle East crisis are considered the biggest variables for domestic economic growth. This is because if inflation pressure increases due to high exchange rates and high oil prices, the domestic economy can sink in an instant. There are also concerns that if the recent ‘super yen’ phenomenon continues, domestic companies competing with Japanese companies may be hit.

Reporter Lee Dong-hoon [e-mail]
Reporter Park Hyeon-ik [e-mail]
Sejong = Reporter Kim Do-hyung [e-mail]

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2024-04-25 20:23:29