South Korea’s Economic Growth Slows Down
A Sluggish Fourth Quarter
South Korea’s economy experienced its slowest growth in over a year, expanding by a mere 1.2% year on year in the fourth quarter of 2024. This falls short of the 1.4% growth predicted by economists and marks a significant decline from the 1.5% rise seen in the previous quarter.
Disappointing Quarter-on-Quarter Growth
On a quarter-on-quarter basis, the economy grew by a paltry 0.1%, missing expectations of 0.2% growth. This sluggish performance is a cause for concern, especially considering the country’s full-year GDP growth for 2024 came in at 2%, a modest improvement from the 1.4% gain seen in the previous year.
Mixed Performance Across Sectors
According to the Bank of Korea, private consumption growth slowed down, while investment in the construction sector declined. On the other hand, government consumption, facility investment, and exports experienced growth. The services and construction industries saw a decline in growth, but the manufacturing industry grew at a faster rate compared to last year.
Monetary Policy Moves
The GDP reading comes on the heels of two unexpected moves by the Bank of Korea. In late November, the central bank cut interest rates by 25 basis points, and then held rates steady in its January 16 meeting. The current policy rate stands at 3%.
Economic Outlook
As the South Korean economy navigates these challenges, it remains to be seen how the country will respond to these developments. With the Bank of Korea’s recent monetary policy moves, it’s clear that the central bank is taking steps to address the slowdown. However, the road ahead will likely be marked by uncertainty, and policymakers will need to carefully balance their decisions to stimulate growth while maintaining stability.
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