South Korea's GDP growth hits 6-year low in 2018

Photo: Bunkerist

Real gross domestic product (GDP), adjusted for inflation, grew 2.7 percent in 2018 from a year earlier, after gaining 3.1 percent in 2017, according to the Bank of Korea (BOK).

It was the lowest growth since 2012 as the reduction in corporate investment offset increases in consumer spending, export and fiscal expenditure.

Investment in the construction sector dipped 4 percent last year, posting the biggest fall in 20 years. The government unveiled a set of measures to control speculative investment in the real estate market, leading to slowdown in the construction industry.

Facility investment slumped 1.7 percent, the lowest in nine years. Companies refrained from spending funds on new facilities amid the lingering external uncertainties.

Export, which accounts for about half of the export-driven economy, increased 4 percent last year, the highest gain in five years. Import added 1.5 percent in the year.

Private consumption, another growth engine of the economy, rose 2.8 percent in 2018, the highest increase in seven years. It stemmed from a rapid hike in minimum wage, which encouraged consumers to spend money.

The South Korean government under President Moon Jae-in adopted a so-called income-driven growth as its major economic policy to raise household income among the low-income bracket and boost consumer spending.

Fiscal expenditure expanded 5.6 percent in 2018, the highest increase in 11 years.

By industry, production among manufacturers rose 3.6 percent in 2018 after growing 4.4 percent in the prior year.

Production in the construction sector retreated 4.2 percent, marking the biggest fall in seven years. Output among services companies increased 2.8 percent, the highest expansion in four years.

During the September-December quarter, the real GDP expanded 1 percent compared with three months earlier. It was higher than the growth rate of 0.6 percent tallied both in the second and third quarters.

The government expenditure jumped 3.1 percent in the fourth quarter from the previous quarter, the highest since the first quarter of 2010. The government increased spending to bolster the lackluster economy.

Private consumption rose 1 percent in the fourth quarter, the biggest increase in four quarters.

Facility investment increased 3.8 percent in the quarter, posting the six-quarter high. Investment in the construction sector added 1.2 percent on demand for public works and non-residential buildings.

Export reduced 2.2 percent in the fourth quarter on soft demand for semiconductors, while import rose 0.6 percent.