GDP in Korea

Korea - GDP

GDP growth records slowest increase since Q1 2021 in the first quarter

According to a preliminary reading, GDP growth slowed markedly to 3.1% year-on-year in the first quarter, from 4.2% in the fourth quarter of last year. Q1's reading marked the softest expansion since Q1 2021. Domestic demand slowed, while external demand strengthened.

Private consumption growth moderated to 4.5% year-on-year in Q1 compared to a 6.3% expansion in Q4. Government spending growth waned to 6.5% in Q1 (Q4 2021: +8.3% yoy). Fixed investment contracted 3.2% in Q1, marking the worst reading since Q1 2019 (Q4 2021: +1.2% yoy).

Exports of goods and services growth sped up to 9.0% in Q1 (Q4 2021: +6.8% yoy). Conversely, imports of goods and services growth softened to 7.9% in Q1 (Q4 2021: +10.2% yoy).

On a seasonally-adjusted quarter-on-quarter basis, economic growth slowed to 0.7% in Q1, compared to the previous quarter's 1.2% increase.

Analysts at ING commented on the reading:

“The slowdown was expected as the Omicron wave hit household consumption, while the government’s social welfare program was also reduced. […] An upside surprise came from exports […] as the negative impacts of the war have not yet been reflected in the Q1 2022 outcome. From the current quarter, the growth engine is expected to shift from exports to domestic consumption. We are already seeing early signs of a recovery in private consumption as the government lifts most restrictions while the trade balance is going to record a deficit for a couple of months in the near future. Based on today’s growth outcome, we maintain our annual GDP forecast at 2.8%.”

FocusEconomics panelists see GDP growth at 2.8% in 2022, which is down 0.1 percentage points from the previous month’s forecast. For 2023, GDP is seen expanding 2.6%.