Due to weak private spending and exports, the South Korean economy contracted by 0.4% in the fourth quarter compared to the third quarter. It posted negative growth for the first time since the second quarter of 2020 but still managed to meet the Bank of Korea’s (BOK) previous full-year growth target of 2.6%.
Preliminary figures released by the BOK on Thursday showed that the nation’s real gross domestic product (GDP) decreased by 0.4 percent from the third quarter to the fourth. The economy’s growth was negative for the first time in ten quarters. After two quarters of negative growth in the first and second quarters of 2020, Korea’s economy increased for the ninth consecutive quarter, starting in the third quarter. The first, second, and third quarters of last year increased by 0.6, 0.7, and 0.3 percent, respectively.
Nevertheless, the Korean economy achieved the BOK’s projected growth rate of 2.6 percent for the entire year of 2022. After 4.1 percent in 2021, it is a year of increase for the second consecutive year. The effects of COVID-19 caused the Korean economy to decrease by 0.7% in 2020. Data showed that private consumption decreased by 0.4% in the fourth quarter after increasing by 2.9% and 1.7% in the second and third quarters, respectively.
Investment in facilities increased by 2.3 percent, down from 7.9 percent in the preceding quarter. Due to the sluggish demand for chips and chemical products, exports fell 5.8% in the fourth quarter compared to the third quarter. Imports also decreased by 4.6%. In contrast, government spending increased by 3.2 percent in the fourth quarter, increasing from a third-quarter gain of 0.1 percent. Investment in construction also increased by 0.7 percent. In the fourth quarter, net exports contributed 0.6 percentage points and private consumption 0.2 points less to the GDP.
Contrarily, government spending made up 0.6 percentage points of the fourth quarter GDP growth, while construction investment made up 0.1 percentage points and facility investment made up 0.2 percentage points. In the fourth quarter, output in the sectors of construction, agriculture, forestry, and fisheries increased by 1.9 percent, 1.5 percent, and 0.8 percent, respectively. However, the manufacturing output decreased again by 4.1%. On improving trade conditions, real gross domestic income (GDI) grew by 0.1 percent in the fourth quarter. However, data showed that real GDI for the entire year fell by 1.1 percent due to worsening trade conditions brought on by increased oil prices.