Korean Economic Outlook for the Second Half of 2024

Robust exports drove economic growth in South Korea in the first half of2024 (H1 2024), even as inflation and high interest rates weighed on domesticdemand. Inflation has eroded purchasing power and consumption whilehigh interest rates have made household debt more difficult to manage. Regardingfacilities investment, there was a temporary surge in semiconductorinvestments earlier this year, but overall investments remained weak due tothe high cost of financing, the uncertain economic outlook, and domesticand international uncertainties. Construction investment saw a brief reboundat the beginning of the year as the prices of construction materials stabilized, but over the course of the year’s first six months construction investmentremained slack due to the ongoing slump in the real estate market and concernsover project financing failures. In contrast, exports were a bright spot,with semiconductors leading the way, and steady increases in the automotiveand shipbuilding sectors. Import growth was limited, contributing to a tradesurplus that has lasted for 11 consecutive months as of April 2024. Industrial production has recorded positive year-over-year (YoY) growthsince August of 2023, bolstered by a recovery in Mining and manufacturingproduction, which had been sluggish until the first half of 2023. Semiconductors,which represent the largest share of manufacturing production,began to rebound in H2 2023. Production and shipments of chips surged by45 and 39 percent, respectively, in the first quarter of 2024 compared to thesame period last year, significantly contributing to the improvement of themanufacturing economy. Thank you for reading this abstract of a paper by the Korea Institute for Industrial Economics and Trade! We are South Korea's premier think tank studying the nexus where trade and industry intersect. http://www.kiet.re.kr/en https://www.ssrn.com/index.cfm/en/korea-inst-industrial-econ-trade-res/