GDP rises 1.3% on recovery in exports, construction investment

Economy

Published: 25 Apr. 2024, 16:22 Updated: 25 Apr. 2024, 17:43

GDP rises 1.3% on recovery in exports, construction investment

A construction site in Suwon, Gyeonggi, on Thursday. Korea's economy grew 1.3 percent in the January-March period from a quarter earlier driven by construction investment and private consumption, according to the Bank of Korea's advance estimates. [NEWS1]

Korea’s economy grew at the fastest pace in more than two years in the first quarter, driven by a recovery in exports and construction investment.

Korea’s gross domestic product (GDP) accelerated 1.3 percent in the January-March period from a quarter earlier according to advance estimates by the Bank of Korea (BOK) on Thursday, outpacing the market estimate of 0.6 percent expansion.

It was the steepest growth since the 1.4 percent posted in the fourth quarter of 2021.

On a yearly basis, the economy grew 3.4 percent in the first quarter.

Private consumption logged 0.8 percent growth in the first quarter compared to a 0.2 percent expansion the previous quarter as expenditures on goods and services rose. Government spending climbed 0.7 percent compared to a 0.5 percent gain the previous quarter.

Exports increased 0.9 percent in the first quarter on expanded outbound shipments of products like cell phones, but the figure marked a slowdown from a 3.5 percent gain in the previous quarter.

Imports fell 0.7 percent due to decreased inbound shipments of electronic equipment compared to a 1.4 percent jump the previous quarter.

Construction investment jumped 2.7 percent over the cited period, helped by an increase in both building construction and civil engineering. It was the steepest rise since the 4.1 percent logged in the fourth quarter of 2019.

The government said in February that it would accelerate joint development projects with the private sector to shore up the construction industry.

The central bank expects the economy to grow at around 2 percent this year, rebounding from 1.4 percent last year, the lowest since a 0.7 percent contraction in the year of the Covid-19 pandemic outbreak in 2020.

The economy expanded 1.4 percent last year, 2.6 percent in 2022 and 4.3 percent in 2021.

“Domestic demand recovered in the first quarter on a significant contribution by private consumption and construction investment,” said Shin Seung-chul, director general of the BOK’s economic statistics division, during a briefing. “Its sustainability will have to be seen.”

Shin said the construction investment was helped by the base effect, noting that uncertainties deriving from real estate project financing loans remain. The economy is projected to continuously recover through the second half of the year, as uncertainties surrounding the weak won and high interest rate are expected to dissipate, he added.

The Ministry of Economy and Finance said on the same day that the first quarter GDP estimate is a “textbook return to the growth path” and “a clear green light” for the country’s economy.

“It was an expansion driven by private consumption,” the ministry said. “The economy demonstrated balanced growth between exports and domestic demand.”

Sung Tae-yoon, presidential director of national policy, said in a briefing that Korea’s economy may exceed the projected 2.2 percent growth this year, saying the first quarter growth is “considerably positive.”

The ministry expects the trend to continue, with fluctuations from quarter to quarter, propelled by improving exports and a gradual expansion of domestic demand.

BY JIN MIN-JI [jin.minji@joongang.co.kr]