The Bank of Korea: "Regional Economy Steady in Q4... Slight Improvement in Chungcheong and Honam Areas"

Publication of Regional Economic Report on the 26th

Under a moderate global economic growth trend, the domestic regional economy in the fourth quarter of this year maintained the same level as the previous quarter. Despite a rebound in semiconductors, the slowdown in automobiles and steel, along with stagnant consumer sentiment, is expected to keep the economy at a standstill for the time being.

On the 26th, the Bank of Korea published the 'Regional Economic Report,' stating, "In the fourth quarter of this year, the regional economy showed a steady level of manufacturing production due to a moderate global economic growth, a weakening recovery of the Chinese economy, and stagnation in domestic investment demand. The service sector also remained steady as the increase in passenger and freight transportation demand was offset by the cumulative effects of high inflation and a sluggish housing market."

According to the regional economic conditions, which comprehensively assessed the economic situation compared to the previous quarter based on production, demand, and employment trends collected through monitoring companies and related organizations, among the seven regions nationwide, the Chungcheong and Honam regions showed slight improvements, while the other regions remained steady.

Lee Jaewon, head of the Regional Economic Survey Team at the Bank of Korea’s Research Department, said, "The regional economy is expected to remain at a similar level to the fourth quarter. Manufacturing production will stay steady despite a rebound in semiconductors, due to slowdowns in automobiles and steel and weakness in petroleum refining and chemicals. The service sector is also expected to remain steady as retail, accommodation and food services, and real estate fail to recover, except for transportation."

In the fourth quarter, manufacturing production remained at a similar level to the previous quarter as growth in automobiles and displays was offset by semiconductors, shipbuilding, and machinery equipment staying flat. The Bank of Korea expects semiconductors and displays to increase with improvements in the IT sector, but the slowdown in automobiles and steel and weakness in petroleum refining and chemicals will maintain a steady trend.

Service sector production sustained the previous quarter’s level overall, with transportation and accommodation/food services improving due to increased passenger and freight transportation demand and large-scale events in some regions. However, retail and real estate slightly declined due to cumulative high inflation and a sluggish housing market. Going forward, transportation is expected to continue growing with the recovery of goods trade and domestic and international travel, but retail, accommodation/food services, and real estate are likely to remain sluggish due to stagnant consumer sentiment, maintaining the fourth quarter’s level, according to the Bank of Korea.

Private consumption in the fourth quarter remained at the previous quarter’s level as both goods and services consumption stayed steady. Private consumption is expected to gradually recover supported by favorable employment conditions and increased household income, but is projected to maintain the previous quarter’s level due to the continued impact of high interest rates.

Facility investment maintained the previous quarter’s level as planned investments continued in semiconductors and secondary batteries. Going forward, facility investment is expected to slightly increase as the IT sector recovers, with expanded investments centered on semiconductors and improvements in eco-friendly and new growth sectors such as electric vehicles and secondary batteries.

Construction investment slightly increased as the public sector decreased marginally due to reduced SOC budget execution by some local governments, while the private sector increased. Construction investment is expected to maintain the previous quarter’s level as the delayed effects of reduced new orders and starts for residential buildings are offset by increased SOC budgets limiting the decline.

Average daily exports increased compared to the previous quarter, driven by semiconductor exports rising due to higher semiconductor prices and expanded export volumes, along with increases in machinery, automobiles, ships, and displays. The Bank of Korea forecasts exports to slightly increase going forward as semiconductor exports continue to recover and demand for IT devices grows.