South Korea’s Q4 GDP shrinks 0.4% on weak private spending

South Korea’s Q4 GDP shrinks 0.4% on weak private spending [Photo by Yonhap]

The South Korean economy shrank 0.4 percent in the fourth quarter from the previous quarter to post negative growth for the first time since the second quarter of 2020 due to weak private spending and exports but it still managed to report 2.6 percent growth for the full year as targeted earlier by the Bank of Korea (BOK).

According to preliminary data announced by the BOK on Thursday, the country’s real gross domestic product (GDP) shrank 0.4 percent in the fourth quarter from the previous quarter. It is the first time in 10 quarters for the economy to report negative growth.

Korea’s economy managed to grow for the ninth straight quarter from the third quarter of 2020 after two quarters of negative growth in the first and second quarters. It grew 0.6 percent in the first quarter of last year, 0.7 percent in the second quarter, and 0.3 percent in the third quarter.

The Korean economy, however, still managed to expand 2.6 percent for the full year in 2022 as targeted by the BOK. It is the second straight year of growth after 4.1 percent in 2021. The Korean economy contracted 0.7 percent in 2020 due to the fallout from Covid-19.

[Image captured from BOK]

Private consumption fell by 0.4 percent in the fourth quarter after 2.9 percent and 1.7 percent increases in the second and third quarters, respectively, data showed. Facility investment gained 2.3 percent to slow from 7.9 percent in the previous quarter.

Exports declined 5.8 percent in the fourth quarter from the previous quarter due to weak demand for chips and chemical products. Imports also fell 4.6 percent.

Government spending, meanwhile, rose 3.2 percent in the fourth quarter, expanding from 0.1 percent gain in the third quarter. Construction investment also rose 0.7 percent.

Private consumption was a negative contributor to the GDP in the fourth quarter by 0.2 percentage point and net exports 0.6 percentage point.

Government spending, on the other hand, contributed 0.6 percentage point, construction investment 0.1 percentage point, and facility investment 0.2 percentage point to fourth quarter GDP growth.

Construction output rose 1.9 percent on quarter in the fourth quarter, agriculture, forestry, and fisheries 1.5 percent, and services 0.8 percent. Manufacturing output, however, retreated 4.1 percent.

Real gross domestic income (GDI) increased by 0.1 percent in the fourth quarter on improved trade environment. Real GDI for the full year, however, decreased by 1.1 percent due to worsened trade conditions led by a rise in oil prices, data showed.