Korea’s Q2 GDP shrinks 0.2% on sluggish private spending

[Courtesy of Bank of Korea]

South Korea’s economy contracted by 0.2 percent in the second quarter from the previous quarter due to sluggish private spending and corporate investments.

According to data released by the Bank of Korea on Thursday, the country’s real gross domestic product (GDP) shrank 0.2 percent in the second quarter from the previous quarter. It is the lowest figure in six quarters since the fourth quarter of 2022 in the wake of the Covid-19 pandemic.

The growth rate is also lower than the market forecasts.

The government and the BOK noted that the contraction in the second quarter is due to the surprise growth of 1.3 percent in the first quarter.

“The first quarter posted significant growth,” said Lee Seung-han, an official from the Ministry of Economy and Finance.

Shin Seung-cheol, an official from the BOK, also added that arithmetically, Korea will be able to achieve its 2.5 percent growth for the year.”

Industry observers, however, noted that the contraction is due to the prolonged slump in domestic demand, including private spending and investment.

They noted that the weak domestic demand is due to the prolonged high interest rate trend.

In the second quarter, private spending shrank 0.2 percent, construction investment 1.1 percent, and facility investment 2.1 percent, according to BOK data.