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Q2 2023: Tracking South Korea's Economic Performance

Photo by Felix Fuchs / Unsplash

Seoul, South Korea - In the second quarter of 2023, South Korea's real GDP, an inflation-adjusted measure of the value of goods and services produced, increased 0.6% from the first quarter.

This aligns with earlier forecasts and highlights the country's steady economic performance amid global uncertainties.

However, it's a different story when it comes to real GNI. Real gross national income, which reflects residents' income, declined by 0.7%.

This suggests that residents' income from abroad took a hit while domestic production grew.

Breaking down GDP on the production front:

  • Manufacturing: A notable increase of 2.5% was observed in manufacturing, driven by increased demand for computer, electronic and optical products.
  • Construction: The construction sector experienced a decline of 3.9%. This decline was attributed to reduced activity in both building and civil engineering.
  • Services: The services sector showed resilience, rising 0.3%, spurred by increased transportation, warehousing, and business activities.

On the expenditure side of GDP:

  • Personal Consumption: A slight decline of 0.1% was reported, driven by lower spending on semi-durable goods such as clothing and services such as food and shelter.
  • Government spending: A more pronounced 2.1% decline in government consumption was documented, mainly due to cuts in social security benefits.
  • Investment: While investment in construction fell by 0.8%, investment in equipment rose by 0.5%, led by investment in machinery.
  • Trade: The export sector contracted by 0.9% despite increases in semiconductors and automobiles due to the decline in exports of petroleum products. Imports declined more sharply by 3.7%, with crude oil and natural gas imports slowing.

The country's real GDP increased by 0.9% on a year-on-year basis in 2Q2023.

Digging deeper into the Gross National Income (GNI) metrics, nominal GNI - GNI at current prices - fell 0.2% from the previous quarter.

This decline came despite a 0.9% increase in nominal GDP, highlighting a decrease in net income inflows abroad.

Key factors such as the deterioration in the terms of trade and the decline in net factor income worldwide contributed to the fall in real GNI.

The GDP deflator, which reflects price changes, increased by 0.5 percent yearly.

Meanwhile, South Korea's gross saving rate was 33.5 percent, up slightly from the previous quarter.

This increase was due to a steeper consumption expenditure decline than nominal gross national disposable income.