Economic growth is muted in Q4

GDP reading: GDP grew 0.1% on a seasonally adjusted quarter-on-quarter basis in the fourth quarter, matching the Q3 reading and below market expectations. Domestic demand was weighed on by political uncertainty after the president briefly declared martial law, while the external sector supported the economy. On an annual basis, economic growth waned to 1.2% in Q4, compared to the previous quarter's 1.5% increase and marking the worst reading since Q2 2023.

Drivers: Household spending growth moderated to 0.2% seasonally-adjusted quarter-on-quarter in Q4 from a 0.5% expansion in Q3. Government consumption expanded 0.5% (Q3: +0.6% s.a. qoq). Meanwhile, fixed investment contracted 0.9% in Q4, contrasting the 0.2% expansion recorded in the previous quarter and dampened by weak construction investment. Exports of goods and services bounced back, growing 0.3% in Q4 (Q3: -0.2% s.a. qoq). Conversely, imports of goods and services deteriorated, contracting 0.1% in Q4 (Q3: +1.6% s.a. qoq).

Panelist insight: On the outlook, United Overseas Bank’s Ho Woei Chen said: “While semiconductor production and investment continue to provide much needed lift to the outlook this year, the uncertainties from US tariff measures and the domestic political crisis will be significantly negative. South Korea’s unemployment rate unexpectedly jumped to 3.7% in Dec from 2.7% in Nov 2024, its highest since Jun 2021 as the fallout on consumption from the political crisis continues to unfold. Factoring in the increase in downside risk, we revise lower our GDP growth forecast for South Korea to 1.7% for 2025 from 2.0% previously.”

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