By Jihoon Lee
SEOUL (Reuters) – South Korea's economy barely grew in the fourth quarter of 2024, missing market expectations, as domestic demand was damaged in part by the country's worst political crisis in decades, raising bets on more fiscal and monetary support to revive growth.
Advanced estimates by the central bank showed on Thursday that gross domestic product grew 0.1 percent from the previous quarter on a seasonally adjusted basis, compared with increases of 0.1 percent in the third quarter and 0.2 percent expected in a Reuters survey.
In December, consumer and business sentiment sank amid political chaos, after President Yoon Suk-yul was impeached and suspended over his short-lived attempt to impose martial law, which was followed by the ouster of Prime Minister Han Dak-soo.
During the quarter, consumer spending rose 0.2% and business investment grew 1.6%, weaker than the previous quarter's gains of 0.5% and 6.5%, respectively, while construction investment fell 3.2%.
Exports rose 0.3%, rebounding from a 0.2% decline in the previous quarter, led by semiconductor sales amid strong demand for artificial intelligence.
South Korea's central bank is expected to cut interest rates next month by 25 basis points, and twice more this year to 2.25%, after its unexpected decision to suspend interest rates this month to prevent the won – which weakened the most among Asian currencies last year – from lowering rates. Interest. From falling more.
“The Korean economy continued to struggle in the fourth quarter and we believe the weakness in activity may continue in the near term due to the ongoing political crisis and the bleak outlook for the construction sector,” said Shivan Tandon, market economist at Capital Economics.
There are growing calls from economists and opposition lawmakers for the government to draft a supplementary budget to support weak domestic demand, with no less than Bank of Korea Governor Ri Chang-yong arguing the issue last week.
Finance Minister Choi Sang-mok, the acting president, said earlier this week that the government was ready to discuss the matter with Parliament.
In the October-December quarter, GDP grew by 1.2% year-on-year, weaker than the 1.5% gains in the previous quarter and the 1.4% that economists had expected, and representing the slowest pace since the second quarter of 2023.
In 2024, Asia's fourth-largest economy grew by 2.0%, after rising by 1.4% in 2023, but its growth is expected to slow again in 2025 to 1.6% or 1.7%, below the estimated potential of about 2%. According to the Bank of Japan. Korea.
