Hana Securities: Korean Economy Entering Recovery Phase

On July 25, Hana Securities analyzed that the Korean economy is entering a phase of gradual recovery.

The previous day, the Bank of Korea announced that the real Gross Domestic Product (GDP) for the second quarter of this year grew by 0.6% compared to the previous quarter. This is the largest increase since the 1.2% growth achieved in the first quarter of last year.

Jeon Kyuyoun, a researcher at Hana Securities, stated, "The economy is showing signs of escaping from a prolonged low-growth phase as it rebounded from negative growth in the previous quarter," adding, "This growth was mainly driven by the private sector, with a contribution of 0.5 percentage points, while the government contributed 0.1 percentage points."

He explained, "With the resolution of domestic political uncertainties, consumer sentiment rebounded after hitting a low in the first quarter, leading to an increase in both goods and services consumption." He also assessed, "Since the impact of U.S. tariffs has not yet fully materialized, exports also increased, mainly in semiconductors and petroleum-chemical products."

Hana Securities forecasted that the gradual recovery of private consumption will continue in the second half of this year. He explained, "The implementation effects of the second supplementary budget, including the distribution of livelihood recovery consumption coupons, as well as improved consumer sentiment, are expected to drive the recovery in consumption."

However, he anticipated that the contribution of investment and net exports would weaken. He emphasized, "There is a high probability that the contribution of investment and net exports will weaken in the second half," and added, "Even after April and May, when concerns over tariffs were heightened, business sentiment among Korean manufacturing companies continued to decline."

He continued, "Due to increased uncertainty, most industries are also reducing their facility investment plans," and added, "Although the impact of tariffs on the external sector remains limited so far, considering that countries with trade surpluses with the U.S. that reached trade agreements have been subject to mutual tariff rates of at least 15%, it is inevitable that Korean exports will suffer some damage even after the Korea-U.S. trade negotiations."

Hana Securities projected that Korea's economic growth rate this year will be 0.9%. He explained, "The positive aspect is that, despite the realization of universal tariffs and some item-specific tariffs, Korean exports are performing better than expected," and added, "Although exports to the U.S., especially automobiles, will likely remain sluggish, diversification of export destinations to regions such as Europe and rising semiconductor prices could partially cushion the export shock in the second half."

He concluded, "Although uncertainties related to tariffs still persist, if external shocks are not excessive, it is expected that the Korean economy will maintain a moderate recovery trend led by private consumption and government spending."