South Korea fourth-quarter GDP grows at its slowest pace in six quarters, missing expectations

South Korea’s economy expanded 1.2% annually in the fourth quarter, marking its slowest expansion since the second quarter of 2023.

Missing anticipated figures the 1.4% expansion expected by economists polled by Reuters, and growth was even softer compared to the 1.5% increase seen in the third quarter of 2024.

On a quarterly 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 was 2% compared to 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%.

“We suspect that the weakness in activity could persist in the near term due to the ongoing political crisis and the bleak outlook for the construction sector,” Shivaan Tandon, markets economist at economic data provider Capital Economics said a note after the release of GDP.

Domestic demand remains the main source of weakness in the economy, Tandon said, indicating that sequential growth in consumer spending slowed to just 0.2% from 0.5% in the third quarter.

He expects growth of 1.1% this year, which is far below BOK’s latest forecast of 1.6%-1.7% growth in 2025.

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 export growth increased.

The BOK also said that the growth of the services and construction industry decreased, but the 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 at its meeting on January 16 . The BOK’s policy rate is currently at 3%.

“Downside risks to economic growth have intensified and exchange rate volatility has increased due to unexpected political risks that have escalated recently… export growth is expected to slow and demand domestica is expected to recover at a slower pace than expected.” the BOK had warned after its last monetary policy meeting.

South Korean consumer sentiment collapsed in December after impeached President Yoon Suk Yeol briefly declared martial law.

U consumer sentiment index It fell to its lowest level since November 2022 to 88.4 in December, signaling that consumers have become pessimistic about the economy. The reading for the previous month had reached 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.

— CNBC’s Anniek Bao contributed to this report.