Exports Drive South Korea’s 2% 2024 Growth Amid Domestic Weakness

The Bank of Korea (BoK) confirmed that South Korea’s economy grew by 2% in 2024, matching earlier projections, as reported on March 4.

This marks an improvement from the 1.4% growth recorded in 2023, but the figures reveal a complex story of resilience and challenges. In the fourth quarter of 2024, GDP rose by 1.2% year-over-year and just 0.1% quarter-over-quarter, maintaining the same pace as Q3.

Private consumption increased marginally by 0.2%, driven by higher spending on services despite reduced expenditures on goods. Government consumption rose by 0.7%, supported by increased healthcare-related spending.

However, construction investment plummeted by 4.5%, reflecting declines in both building construction and civil engineering projects. Exports provided a bright spot, expanding by 0.8% in Q4. This growth was largely driven by strong demand for semiconductors and other IT products.

Imports edged up by 0.1%, driven by machinery and equipment purchases. Facilities investment also grew by 1.2%, led by spending on machinery despite reduced investments in transportation equipment.

For the full year, South Korea‘s per capita Gross National Income (GNI) rose by 1.2% to ₩36,624 ($6,104), reflecting nominal growth amid inflation and currency fluctuations.

South Korea’s Economic Outlook

In Korean won terms, GNI increased by a more pronounced 5.7%, highlighting the won’s depreciation against the dollar. Despite these gains, domestic demand remained sluggish due to high household debt and a cooling real estate market.

The household debt-to-GDP ratio fell below 100% for the first time in three years but remained high at 98.9%. Meanwhile, inflation eased to below 3%, prompting expectations of interest rate cuts in late 2024 or early 2025 to stimulate domestic consumption.

Sectoral performance showed mixed results: manufacturing grew by just 0.2%, while services expanded by 0.4%, led by finance and healthcare sectors. However, construction contracted sharply, dragging down overall growth.

South Korea’s export-driven economy continues to face global uncertainties, particularly in semiconductor demand—a key driver of its recovery. Analysts forecast modest growth in early 2025 as external demand stabilizes and government policies aim to boost domestic spending.

While the figures show resilience, they highlight structural challenges such as an aging population and reliance on exports. These factors could weigh on long-term economic prospects without significant reforms.

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