The Seoul skyline.
Mongkol Chuewong | Moment | Getty Images
South Korea’s economy expanded 1.2% year on year in the fourth quarter, marking its slowest expansion since the second quarter of 2023.
Advance figures missed the 1.4% expansion expected by economists polled by Reuters, and the growth was also softer compared with the 1.5% rise seen in the third quarter of 2024.
On a quarter-on-quarter basis, GDP growth also missed expectations, with the economy growing just 0.1% compared to the 0.2% forecast in the Reuters poll.
However, full-year GDP growth for 2024 came in at 2% compared with last year’s 1.4% gain.
The South Korean won weakened 0.13% to 1,436.4, while the country’s benchmark stock index Kospi fell 0.47%.
The Bank of Korea said that in 2024, private consumption growth fell and investment in the construction sector declined, but government consumption, facility investment, and exports growth rose, according to a Google translation of the release in Korean.
The BOK also said that growth in the services industry and construction industry decreased, but manufacturing industry grew at a faster rate compared to last year.
The GDP reading comes after the Bank of Korea made two surprising moves in recent months, first cutting rates by 25 basis points in late November and then holding rates in its meeting on Jan. 16 meeting. The BOK’s policy rate currently stands at 3%.
After its last meeting, the BOK had said that GDP growth in South Korea was “highly likely” to miss its forecasts of 2.2% for 2024 and 1.9% for 2025, respectively.
“Downside risks to economic growth have intensified and the volatility of exchange rates has increased due to the unexpected political risks that have recently escalated … export growth is expected to slow and domestic demand is forecast to recover at a slower pace than expected,” the BOK had warned.
South Korea’s consumer sentiment had collapsed in December after the short-lived martial law declaration by impeached president Yoon Suk Yeol.
The consumer sentiment index plunged to its lowest level since November 2022 at 88.4 in December, signaling that consumers had turned pessimistic about the economy. It’s reading for the prior month had come in at 100.7.
The index recovered to 91.2 in January, but it was still short of the 100 mark that separates consumer pessimism from optimism.