South Korea's Q4 GDP Growth Disappoints, Impacted by Political Turmoil
South Korea's economy experienced minimal growth in the fourth quarter of 2024, falling short of market predictions. The country's domestic demand suffered amidst its worst political crisis in recent history, according to preliminary estimates released by the central bank on Thursday.
On a seasonally adjusted basis, gross domestic product (GDP) increased by a meager 0.1% from the previous quarter, below the 0.2% growth forecast in a Reuters poll. This compares to a 0.1% rise in the third quarter.
Political instability, stemming from President Yoon Suk Yeol's impeachment and suspension of duties, led to a decline in consumer and business confidence in December. Consumer spending rose by a modest 0.2%, while corporate investment grew by 1.6%. These figures fell short of the previous quarter's gains of 0.5% and 6.5%, respectively. Construction investment contracted by 3.2%.
Despite their earlier decline, exports rebounded by 0.3%, driven by robust demand for semiconductors in artificial intelligence.
The central bank is expected to reduce interest rates in the upcoming month, following an unexpected rate hold this month. The move aims to prevent further depreciation of the South Korean won, which experienced the most significant weakness among Asian currencies in 2024.
For the October-December quarter, GDP grew by 1.2% year-on-year, slower than the previous quarter's 1.5% growth and the 1.4% anticipated by economists. This marked the weakest pace since the second quarter of 2023.
According to the Bank of Korea, the fourth-largest economy in Asia expanded by 2.0% in 2024, following a 1.4% growth in 2023.