Economy Stumbles in Final Quarter on Weak Construction and Facility Investment, but Manages 1% Annual Growth

The Financial News – In the final quarter of last year, the Korean economy took a step back. It had grown for two consecutive quarters, but this time it stumbled somewhat. Even so, the annual growth rate held at 1.0%, avoiding a slide into the zero-percent range.
■Fourth-quarter growth rate: -0.3%According to the Bank of Korea (BOK) on the 22nd, real GDP in the fourth quarter of last year decreased 0.3% from the previous quarter. Compared with the same period a year earlier, it was up 1.5%.
Looking at the details, private consumption rose 0.3% quarter-on-quarter. Spending on goods such as passenger cars declined, but this was offset by higher spending on services, including medical services. Year-on-year, private consumption increased 1.9%. Government consumption also grew, led by higher national health insurance benefit payments, rising 0.6% from the previous quarter and 3.2% from a year earlier.
Construction investment, however, fell 3.9% as both building construction and civil engineering works declined. Compared with a year earlier, it slumped 7.4%. Facility investment decreased 1.8%, mainly due to weaker spending on transportation equipment such as automobiles, and was down 1.7% from the same period a year before.
Exports dropped 2.1% as shipments of automobiles, machinery and equipment declined, while imports fell 1.7% on reduced purchases of natural gas and automobiles. On a year-on-year basis, however, exports and imports expanded 3.8% and 3.2%, respectively.
By economic activity, agriculture, forestry and fisheries grew 4.6% from the previous quarter, driven mainly by crop production. In contrast, manufacturing (-1.5%), electricity, gas and water supply (-9.2%), and construction (-5.0%) all contracted.
In the services sector, wholesale and retail trade and accommodation and food services declined. However, this was more than offset by growth in finance and insurance, as well as in health, medical and social welfare services, resulting in a 0.6% increase overall. Compared with a year earlier, services expanded 2.6%.
Real gross domestic income (GDI) rose 0.8% in the fourth quarter from the previous quarter. It was up 2.7% from the same period a year earlier.
■Annual growth in line with forecastsFor full-year 2025, the annual growth rate was 1.0%, matching the projection made by the Monetary Policy Board in November last year. This was 0.1 percentage point higher than the 0.9% forecast released in August. It also exceeded the 0.9% growth estimate presented separately by the Korea Development Institute (KDI) and the International Monetary Fund (IMF).
An official at the BOK explained, "By expenditure component, the decline in construction investment deepened, but the pace of increase in private and government consumption strengthened while export growth continued." The official added, "By economic activity, the downturn in construction became more pronounced and manufacturing growth weakened, whereas the expansion in services and other sectors accelerated."
In annual terms, private consumption and government consumption increased 1.3% and 2.8%, respectively, from the previous year. Construction investment, by contrast, declined 9.9%. Exports and imports rose 4.1% and 3.8%, respectively.
Real GDI for the year also increased 1.7%.
taeil0808@fnnews.com Kim Tae-il Reporter