Korea’s GDP Growth in the First Quarter of 2022

Korea’s economic growth slowed in the first quarter of 2022, with its gross domestic product (GDP) expanding by 0.7% quarter on quarter. While the economy was weighed down by the risks stemming from the Russia-Ukraine crisis and global supply chain disruptions, the slowdown was also driven by a contraction in consumer spending due to restrictions imposed to prevent the spread of Omicron.  On a year-on-year basis, GDP growth also sharply slowed to 3.1% in the January – March period of 2022 from 4.2% in the previous three-month period.

(Source: Bank of Korea, April 26, 2022)

Private consumption decreased by 0.5% quarter on quarter as Korea reported record numbers of new COVID-19 infections in March, reaching the peak of an Omicron-driven infection wave. Consumer spending increased by 4.5% year on year despite a reduction in spending on semi-durable goods and services.  

Construction investment was also down 2.4% compared to three months earlier and declined by 5.3% compared to a year earlier due to decreased investment in both building construction and civil works. Equipment investment fell by 4% on quarter and by 6% on year amid reduced spending on machinery and transportation equipment.

Exports jumped by 4.1% from three months earlier, backed by semiconductors and chemical products, while imports rose by 0.7% due to increased inbound shipments of crude oil. Year-on-year growth rates were 9% for exports and 7.9% for imports. In March 2022, Korea’s monthly exports hit a record high, fueled by strong demand for chips and petrochemicals, and solid growth momentum continued with double-digit growth rates for 13 months in a row.  

Growth prospects for the Korean economy have been lowered recently, as the war in Ukraine has triggered a new supply shock for economies around the world. Elevated commodity prices put downward pressure on domestic demand and upward pressure on inflation. In April 2022, the International Monetary Fund lowered its 2022 growth projection for Korea to 2.5% from its earlier projection of 3.0% while upgrading its inflation projection to 4.0% from 3.1%.

                                                               < Quarterly Economic Growth >                    (Unit: %)

*Figures in (    ) refer to year-on-year growth rates.

(Source: Bank of Korea, April 26, 2022)