South Korea’s economy demonstrated strong growth in the second quarter, surpassing expectations and signaling a recovery after narrowly avoiding a technical recession in the previous quarter.
According to preliminary data from the Bank of Korea, the country’s gross domestic product (GDP) expanded by 0.6% on a quarterly basis during the April-June period. This growth follows a 0.3% increase in the first quarter, highlighting the economy’s resilience. In comparison, the final quarter of 2022 witnessed a contraction of 0.3% on a quarterly basis.
The recent figures, which exceeded the market consensus forecast of a 0.5% expansion, indicate a moderating decline in facility investments thanks to increased machinery production. However, exports experienced a setback, declining once again after a temporary rebound in the previous quarter. The weaker shipments of petrochemicals and shipping services outweighed the stronger exports of semiconductors and cars. Both government spending and private consumption remained weak during this period.
On a year-on-year basis, South Korea’s economy grew by 0.9% in the second quarter, surpassing the consensus forecast of 0.8% growth and outperforming the revised 0.9% growth recorded in the prior quarter.
Nevertheless, the country’s economy is still expected to face challenges this year. Global demand for electronics, chips, and other Korean goods remains sluggish, restraining growth opportunities. Additionally, higher borrowing costs resulting from years of policy tightening to combat inflation are weighing on private spending and business investments.
As a result, both the central bank and the government have revised down their earlier forecast for economic expansion in 2023. They now expect the economy to grow by 1.4%, compared to the previous estimate of 1.6%. This comes after recording 2.6% growth in 2022. Looking further ahead, the central bank projects a gradual rebound with 2.4% growth anticipated in 2024.
While challenges persist, the South Korean economy has demonstrated its resilience and is well-positioned for gradual recovery.