South Korea's Economy Shrinks 0.2% in Q2 2024: GDP Report.

Seoul, South Korea - South Korea's economic growth stumbled in the second quarter of 2024, with gross domestic product shrinking 0.2% compared to the previous three months, according to advance estimates released by the Bank of Korea on Thursday. 

This unexpected contraction, the first since the depths of the COVID-19 pandemic, raises questions about the resilience of Asia's fourth-largest economy in the face of global headwinds.

Economic Indicators Paint a Mixed Picture

The quarter-on-quarter decline was broad-based, affecting multiple sectors of the economy:

• Private consumption fell by 0.2%, with decreased spending on goods like motor vehicles and clothing outweighing increased expenditures on services such as education.
• Investment: Both construction and facilities investments contracted by 1.1% and 2.1%, respectively. The decline in facilities investment was particularly pronounced in machinery, though transportation equipment saw some growth.
• Trade: Exports grew by 0.9%, buoyed by increased shipments of motor vehicles and chemical products. However, imports rose at a faster pace of 1.2%, driven by higher crude oil and petroleum product purchases.
• Production: The construction sector was the hardest hit, declining by 5.4%. Manufacturing managed a modest 0.7% increase, supported by growth in transportation equipment production.

Despite the quarterly contraction, the year-on-year figures present a more positive outlook. 

The economy grew 2.3% compared to the same quarter last year, while real gross domestic income (GDI) increased robustly by 4.4% year over year.

The agriculture, forestry & fishing sector emerged as a bright spot, growing 5.4% quarter-on-quarter, driven by increased livestock production and fisheries. 

In contrast, the services sector stagnated, with gains in transportation and storage offset by declines in wholesale and retail trade, accommodation and food services, and information and communication.

These advance estimates offer an early glimpse into South Korea's economic performance. 

More detailed preliminary figures are expected within 70 days. 

As global economic uncertainties persist, the coming months will be crucial in determining whether this contraction is a temporary setback or signals a more prolonged period of economic challenges for South Korea.