South Korea’s economy shrank last quarter, but ‘silver lining’ ahead as China reopens

South Korea’s GDP shrank 0.4 per cent in the fourth quarter of 2022, mainly due to slow exports including its crucial semiconductors

But there are signs private consumption is growing, and observers expect a turnaround in the second half of 2023 as the global economy recovers

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A currency trader walks by a screen showing the Korea Composite Stock Price Index (KOSPI). Photo: AP/File

Published: 10:00am, 27 Jan 2023Updated: 10:31am, 27 Jan 2023

South Korea’s economy, a bellwether for global economic trends due to its heavy reliance on trade, is expected to rebound in the coming months on the back of China’s reopening and improving global demands, its top economic minister said.

Finance Minister Choo Kyung-ho made the statement on Thursday after Asia’s fourth-largest economy posted a contraction for the September to December period – the first negative growth in two-and-a-half years since the pandemic began.

South Korea’s gross domestic product (GDP) shrank 0.4 per cent in the fourth quarter of 2022, compared with the previous quarter’s 0.3 per cent growth, mainly due to slow exports including its crucial semiconductors.

For all of 2022, South Korea’s GDP is estimated to have grown 2.6 per cent, down from a 4.1 per cent increase the year before, the central Bank of Korea (BOK) said.

“Thanks to the base effect [that stems from low, comparable figures] and the reopening of China, we look forward to a shift to a positive growth in this quarter [to March],” Choo said at a meeting with other economy-related government ministers.

Park Chong-hoon, an economist at Standard Chartered Korea, said it was unclear how much South Korea could benefit from China’s reopening as emerging economies in the region were also likely to gain from growing demands in China.

An economic slowdown in China particularly hurt South Korean exports last year.