Korea's national income falls 1.4%, GDP drops 0.2% in Q2 amid weak demand

Economy

Korea's national income falls 1.4%, GDP drops 0.2% in Q2 amid weak demand

Published: 05 Sep. 2024, 09:21 Updated: 05 Sep. 2024, 21:29

SHIN HA-NEE
shin.hanee@joongang.co.kr

A construction site for an apartment complex in Seoul on Thursday. [NEWS1]

Korea's national income declined by 1.4 percent in the second quarter due to fuel price hikes, while the economy shrank by 0.2 percent amid sluggish domestic demand.

According to preliminary data from the Bank of Korea (BOK) on Thursday, the country's real gross national income (GNI) retreated by 1.4 percent in the April-June period from the previous quarter, outpacing the quarterly fall of 0.2 percent in the real gross domestic product (GDP).

The latest contraction in the GNI followed a steep 2.4 percent on-quarter jump in the first quarter. This is the first negative growth since the 0.9 percent decline logged in the second quarter of last year, and the biggest fall since the minus 1.6 percent in the third quarter of 2021.

The central bank attributed the fall to a deterioration in the trading environment led by growth in the trade deficit in the second quarter as well as a base effect from the sharp increase in the preceding quarter.

"The price increase of import items, such as crude oil and natural gas, was bigger than the price growth of export items such as semiconductors, which led to a deterioration in real trading losses,” said Kang Chang-gu, head of national accounts at the BOK, during a press conference Thursday.

Korea's real trade losses expanded from 11.3 trillion won ($8.45 billion) in the first quarter to 16.6 trillion won in the second quarter, driven mainly by energy price hikes.

Kang Chang-gu, head of national accounts at the Bank of Korea (BOK), speaks during a press briefing held at the central bank in central Seoul on Thursday. [BOK]

Meanwhile, the real GDP decreased by 0.2 percent from the previous quarter, aligning with the advance estimate announced by the central bank on July 25.

The quarterly contraction, driven by a decline in construction and facility investments, followed strong growth of 1.3 percent in the preceding three-month period. It is the first negative on-quarter growth since the fourth quarter of 2022, when the GDP decreased by 0.5 percent.

Private consumption retreated by 0.2 percent from the previous quarter, also in line with the advance estimate. The quarterly decline in construction investments, however, was adjusted downward to minus 1.7 percent, exceeding the previously announced figure of minus 1.1 percent.

Facility investments contracted by 1.2 percent, an upward adjustment from the advance estimate of minus 2.1 percent.

During the cited period, exports rose 1.2 percent, driven by the automotive and chemical sectors, while imports increased by 1.6 percent, mainly due to crude oil and petroleum products.

Despite the downtick, the central bank said that the economy still appears to be on track to achieve 2.4 percent GDP growth this year.

“The BOK has projected that export growth will continue in the latter half of the year, while domestic demand is expected to improve with favorable corporate performances boosting investment capacities as stabilizing inflation drives real household incomes — and that projection still stands,” said Kang.

Updated, Sept. 5: Updated with a new lead sentence, added details about the preliminary GNI and GDP, and comments from the Bank of Korea.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]