Refer Report
GDP also down 0.2%… Impact of trade loss
In the second quarter of this year, real domestic income decreased by 1.4% compared to the first quarter. It is the largest decrease in 2 years and 9 months compared to the previous quarter. Gross domestic product (GDP) also decreased by 0.2% compared to the first quarter. Exports increased, but private consumption remained sluggish.
The Bank of Korea announced on the 5th that the real gross national income (GNI) in the second quarter was tallied at 559.5 trillion won, down 1.4% from the first quarter. This is the largest decrease in 2 years and 9 months since the third quarter of 2021 (-1.1%). It is also the first time in a year since the second quarter of last year (-0.9%) that the real GNI recorded a minus. Real GNI is an indicator of the real purchasing power of the income earned by our citizens at home and abroad.
The Bank of Korea explained that the deterioration of trade conditions in the second quarter had a major impact. The real trade loss expanded from KRW 11.3 trillion in the previous quarter to KRW 16.6 trillion in the second quarter.
Kang Chang-gu, director of the Bank of Korea’s National Accounts Department, explained, “We earned a lot in the second quarter from exports of semiconductors and other products, but the prices of imported crude oil and natural gas rose more than that, resulting in a larger real trade loss.”
However, real GNI increased by 3.4% compared to a year ago. Although the trend is upward, it means that purchasing power has decreased compared to the beginning of the year due to the characteristics of the second quarter of this year.
The ‘GDP deflator’, which indicates the price level of the entire national economy, rose 4.8% in the second quarter (compared to the same period last year). It is the highest level in 21 years since the fourth quarter of 2002 (up 4.8%).
The Bank of Korea explained that this was not due to the impact of the domestic price level, but rather the impact of the high price level of export products such as semiconductor prices. Vice Minister Kang explained, “Domestic prices are not particularly high at the low to mid 2% level, but semiconductor prices have been rising since the second half of last year, which has improved the terms of trade and become a factor in raising the overall GDP deflator.”
In addition, the real GDP growth rate (preliminary figure) for the second quarter was tallied at -0.2% compared to the first quarter. It is the same figure as the preliminary figure announced earlier, and it is the first time in 1 year and 6 months since the fourth quarter of 2022 (-0.5%) that the quarterly growth rate recorded a minus figure.
Exports increased by 1.2%, led by automobiles and chemical products. However, imports of crude oil, natural gas, and petroleum products increased by 1.6%, far exceeding exports. Government consumption also increased by 0.6%.
On the other hand, private consumption decreased by 0.2% due to sluggish consumption of goods such as passenger cars and clothing, and facility investment also decreased by 1.2%, centered on machinery such as semiconductor manufacturing equipment. Construction investment, which led the ‘surprise growth’ by increasing by 3.3% in the first quarter, also decreased by 1.7% in the second quarter.
Source: Korean