Bank of Korea: Regional Economy to Improve in Second Half on Supplementary Budget and Consumer Sentiment

Regional Economy Sluggish in Honam, Daegyeong, Gangwon, and Jeju in First Half of the Year
Housing Sales Prices Rise Only in the Seoul Metropolitan Area

In the first half of this year, the regional economies of the Honam region, Daegyeong region, Gangwon region, and Jeju region showed sluggish performance. Housing sales prices rose only in the Seoul metropolitan area. In the second half of the year, the regional economic situation is expected to improve, supported by the government's supplementary budget execution and improved consumer sentiment.

Yonhap News

According to the regional economic report published by the Bank of Korea on July 28, regional production in the first half of this year remained largely unchanged from the second half of last year in the Seoul metropolitan area, the Southeast region, and the Chungcheong region. However, the Honam region, Daegyeong region, Gangwon region, and Jeju region saw a slight decrease.

In the Honam region, service sector production declined slightly, while in the Gangwon region, manufacturing production decreased slightly. In the Daegyeong region and Jeju region, both manufacturing and service sector production declined slightly. By industry, manufacturing production remained flat in most regions, while construction declined in all regions. In the service sector, the Seoul metropolitan area saw a slight increase.

In manufacturing, the semiconductor sector in the Seoul metropolitan area and Chungcheong region continued to perform well, driven by investment demand for artificial intelligence (AI). Hybrid vehicles and parts, mainly in the Chungcheong region and Honam region, saw increased production due to export expansion. Shipbuilding in the Southeast region and Honam region increased production thanks to sufficient order volumes.

Petroleum refining and chemical production decreased mainly in the Southeast region, Chungcheong region, and Honam region. Steel production also declined in the Southeast region, Chungcheong region, and Honam region due to continued global oversupply. In the service sector, finance and insurance in the Seoul metropolitan area saw increased production, supported by a strong stock market and expanded lending. Real estate activity increased only in certain regions, such as the Seoul metropolitan area and Gangwon region, where housing and rental transactions rose.

Retail trade showed mixed trends by region. The Southeast region, Chungcheong region, and Daegyeong region saw increases, while the Seoul metropolitan area and Gangwon region remained flat. The Honam region and Jeju region experienced declines. In accommodation, food and beverage, and transportation, most regions saw a decrease in production due to heightened political uncertainty at the beginning of the year. Construction declined in all regions due to increased construction costs and the accumulation of unsold homes outside the Seoul metropolitan area.

Housing sales prices fell in all regions except the Seoul metropolitan area. The magnitude of decline was greater in the Southeast region, Chungcheong region, Honam region, and Daegyeong region. In the Seoul metropolitan area, the rate of increase slowed. Population inflow into the Seoul metropolitan area and Chungcheong region decreased, while the outflow from the Southeast region, Honam region, and Daegyeong region also lessened. However, the outflow from the Gangwon region and Jeju region increased.

In the first half of this year, the number of employed people increased at a greater rate in the Chungcheong region and Gangwon region, while the growth rate slowed in the Seoul metropolitan area. In the Southeast region and Daegyeong region, employment shifted from a decrease to an increase, but in the Honam region, the rate of decline worsened.

A slight improvement is expected in the second half of the year. Jeong Minsu, head of the Regional Economic Survey Team at the Bank of Korea's Economic Statistics Department, stated, "The regional economy is expected to show a slight improvement or remain firm in all regions in the second half compared to the first half, supported by the supplementary budget, domestic demand stimulus policies, and improved consumer sentiment."