In the second quarter of this year, the Korean economy grew by 0.6%, recovering from the negative growth shock in the first quarter. The resolution of domestic political uncertainties led to increases in both domestic demand and exports, driving economic growth. The real gross national income (GDI) also rose by 1.3% compared to the previous quarter.
According to the ‘National Income (Preliminary)’ report released by the Bank of Korea on the 24th, the real gross domestic product (GDP) for the second quarter of this year increased by 0.6% compared to the previous quarter. The growth rate showed significant improvement compared to the first quarter (-0.2%) and is the largest since the first quarter of last year (1.2%).
Quarterly GDP growth rates showed a continued slowdown, following a surprising growth in the first quarter of last year (1.2%), with subsequent quarters recording -0.2% in the second quarter, 0.1% in the third quarter, 0.1% in the fourth quarter, and -0.2% in the first quarter of this year. This marks the first time that quarterly GDP has recorded below 0.1% for four consecutive quarters. However, it rebounded with a growth of 0.6% in the second quarter, breaking away from the sluggish trend.
By institutional sector, both domestic demand and exports improved. Private consumption, which is a crucial component of domestic demand, increased by 0.5% due to rises in the consumption of goods (such as automobiles) and services (such as entertainment and healthcare). This is the largest increase since the first quarter of last year (0.5%). Government expenditure also grew by 1.2%, marking the highest growth since the fourth quarter of 2022 (2.3%), likely due to increased government spending following the passage of the supplementary budget.
However, construction investment and facility investment, which are other components of domestic demand, both fell by 1.5%. Construction investment decreased primarily in buildings and civil engineering, while facility investment decreased mainly in machinery (including semiconductor manufacturing equipment) and transport equipment (such as ships). Construction investment has now seen negative growth for five consecutive quarters, and facility investment for two consecutive quarters. It is worth noting that the reduction in construction investment was halved compared to the first quarter (-3.1%), while the reduction in facility investment was greater than the previous quarter (-0.4%).
Exports, which were sluggish in the first quarter, increased significantly. Exports in the second quarter rose by 4.2%, led by increases in semiconductors and petrochemicals. This marks the largest increase since the third quarter of 2020 (+14.6%). Imports also increased by 3.8%, mainly driven by energy products (crude oil, natural gas), showing significant improvement compared to the previous quarter (-1.1%). The increase in imports is the largest since the first quarter of 2023 (+4.0%).
The contributions to economic growth came from domestic demand at 0.3 percentage points (p) and net exports at +0.3p. By domestic demand component, the performance was mixed. Private consumption and government consumption each recorded 0.2p, but construction investment (-0.2p) and facility investment (-0.1p) showed negative contributions. Net exports were accounted for at 0.3p, maintaining a positive contribution for three consecutive quarters.
In the second quarter of this year, the real gross national income (GDI) increased by 1.3% compared to the previous quarter, showing significant improvement from the previous quarter (-0.6%). This increase is the largest since the first quarter of last year (+1.9%). Gross national income refers to the total income generated within a country, calculated by subtracting government subsidies from the sum of all wages, profits, and taxes.
Meanwhile, the GDP growth rate compared to the same period last year recorded 0.5%. This growth rate is larger than the first quarter (0.0%). The growth rate of GDI compared to the same period last year was also recorded at 1.4%, showing significant improvement from the previous quarter (-0.1%).