South Korea’s financial system barely grows in This fall amid political chaos

By Jihoon Lee

SEOUL (Reuters) -South Korea’s financial system barely grew within the fourth quarter of 2024, lacking market expectations, as home demand was harm partially by the nation’s worst political disaster in many years, elevating bets for extra fiscal and financial assist to revive progress.

Gross home product (GDP) expanded 0.1% from 1 / 4 earlier on a seasonally adjusted foundation, superior central financial institution estimates confirmed on Thursday, in contrast with will increase of 0.1% within the third quarter and 0.2% forecast in a Reuters survey.

In December, shopper and enterprise sentiment dampened amid political chaos, after President Yoon Suk Yeol was impeached and suspended from duties over his short-lived bid to impose martial legislation, adopted by the impeachment of Prime Minister Han Duck-soo.

For the quarter, shopper spending rose 0.2% and company funding grew 1.6%, weaker than the earlier quarter’s positive aspects of 0.5% and 6.5%, respectively, whereas building funding fell 3.2%.

Exports rose 0.3%, recovering from their fall of 0.2% 1 / 4 earlier, led by gross sales of semiconductors on sturdy demand for synthetic intelligence.

South Korea’s central financial institution is anticipated to decrease rates of interest subsequent month by 25 foundation factors, and twice extra this yr to 2.25%, after its surprising rate-hold choice this month to stop the received – which weakened essentially the most amongst Asian currencies final yr – from falling additional.

“Korea’s financial system continued to battle in This fall and we suspect that the weak point in exercise may persist within the close to time period as a result of ongoing political disaster and the grim outlook for the development sector,” stated Shivaan Tandon, Markets Economist at Capital Economics.

There are rising calls from economists and opposition lawmakers for the federal government to draft a supplementary funds to assist frail home demand, with no much less a determine than Financial institution of Korea Governor Rhee Chang-yong arguing the case final week.

Finance Minister Choi Sang-mok, serving as appearing president, stated earlier this week the federal government was keen to debate it with parliament.

Within the October-December quarter, GDP grew 1.2% on an annual foundation, weaker than positive aspects of 1.5% the quarter earlier than and 1.4% anticipated by economists, and marked the slowest tempo because the second quarter of 2023.

In 2024, Asia’s fourth-largest financial system grew 2.0%, after rising 1.4% in 2023, however its progress is projected to gradual once more in 2025 to 1.6% or 1.7%, under the estimated potential of round 2%, in line with the Financial institution of Korea.