South Korea's gross domestic product (GDP) grew 2.6% in 2022 and another 0.3% in the first quarter of 2023, indicating some resilience in the economy amid sector-specific fluctuations.
Why it matters: The performance of South Korea's economy has implications for its trading partners and global supply chains, particularly in the technology and automotive sectors.
- The manufacturing sector will grow by 1.5% in 2022, driven by increased production of computer, electronic, and optical products and transportation equipment. However, due to lower crop production, agriculture, forestry, and fishing will decline by 1.0%.
- While the construction sector grew by 0.7% on the back of increases in residential, non-residential, and civil engineering work, investment in buildings fell by 2.8%, and investment in equipment fell by 0.9%.
- The services sector posted a significant gain of 4.2%, driven by increases in wholesale and retail trade, transportation, warehousing, and cultural services. This was supported by a 4.1% increase in private consumption, with higher spending on restaurants, accommodation, and recreation services.
- Despite mixed results across sectors, exports of goods and services rose 3.4% overall, with notable increases in semiconductors and autos.
The Big Picture: While GDP grew in 2022 and Q1 2023, gross national income (GNI), which includes income from abroad, fell 0.7% in 2022 but rebounded with a 1.9% increase in Q1 2023.
The GDP deflator, a measure of inflation, rose 1.3% in 2022. The gross saving and investment rates have changed slightly.
Although the data present a complex picture, the continued growth in GDP suggests some resilience.
However, declining construction and equipment investment and GNI in 2022 suggest areas needing attention.
These trends are critical for policymakers, investors, and strategists, as their implications could affect the future trajectory of economic growth.
In South Korea's tech-centric economy, the strength of the manufacturing sector is vital. However, the economy's overall health may depend on a broader recovery across all sectors.