Q3 GDP Posts 'Surprise' 1.0% Growth... GDI Hits 49-Year High (Updated)

BOK releases advance estimate of third-quarter real GDP
GDP up 3.4% year on year, far above August forecast
GDI also posts a "surprise" 18.8% year-on-year gain

South Korea's economy posted a surprise 1.0% growth in the third quarter of this year. The figure far exceeded earlier forecasts, which had projected a slowdown, and growth continued from the first quarter, rising 3.4% year on year. Real gross domestic income (GDI), which reflects the income actually earned through production, reached its highest level since 1977 and has recorded double-digit growth for three consecutive quarters.

The Bank of Korea (BOK) announced on Tuesday, the 27th, that real gross domestic product (GDP) grew 1.0% in the third quarter from the previous quarter, according to its preliminary estimate. This was well above the BOK's forecast of 0.3% released in August.

In its economic outlook released in August, the BOK projected that growth would slow slightly in the third quarter, partly due to a base effect from the high growth rates recorded earlier. In reality, however, the economy posted surprise growth in the 1% range, following growth of 1.8% in the first quarter.

Year on year, the economy grew 3.4%, maintaining growth of more than 3% for the third consecutive quarter.

The higher growth rate resulted from continued increases in semiconductor-led exports and facility investment, along with a sharp rise in government consumption.

In domestic demand, government consumption, construction investment and facility investment all increased from the previous quarter, while private consumption declined. Government consumption rose 1.9%, as spending on goods—which covers purchases of materials such as real estate, fixtures and supplies—and health insurance benefit payments both increased. Private consumption, by contrast, fell 0.2%, as spending on goods such as passenger cars and home appliances, as well as services such as financial and food services, declined.

Facility investment increased 4.1% from the previous quarter, as investment in machinery, including machines used to manufacture semiconductors, grew. Construction investment also rose 0.7%, driven mainly by civil engineering, returning to growth after one quarter.

Intellectual property product investment increased 2.3% from the previous quarter, as research and development and software investment rose.

Exports increased 2.3% from the previous quarter, led by semiconductors, machinery and electrical equipment. Imports rose 2.4%, as imports of crude oil and machinery used to manufacture semiconductors increased.

By expenditure category, domestic demand drove growth in the third quarter. Its contribution to growth was 0.9 percentage points. More specifically, consumption contributed 0.2 percentage points, facility investment 0.4 percentage points and construction investment 0.1 percentage points, boosting domestic demand's contribution. By economic sector, government consumption contributed 0.8 percentage points, more than the 0.2 percentage points contributed by the private sector, underscoring government-led growth.

Net exports (exports minus imports) contributed 0.1 percentage points to growth. Exports added 1.1 percentage points, but imports also added 1.0 percentage points, leaving net exports' contribution below the 0.3 percentage points recorded in the previous quarter.

All major industries recorded growth. Agriculture, forestry and fishing grew 5.9% from the previous quarter, led by crop production and fishing. Manufacturing rose 2.0%, as output of computers, electronic and optical equipment, and machinery and equipment increased. Construction also grew 2.0%, while services rose 0.2%, led by business services, information and communications, and transportation. However, services growth was sharply lower than the 1.0% recorded in the second quarter.

Real GDI increased 3.4% from the previous quarter in the third quarter, outpacing GDP growth. Year on year, it rose 18.8%, the highest rate since the fourth quarter of 1977, when it grew 19.0%.

This content was produced with the assistance of AI translation services.