Growth in Manufacturing Sectors Such as Semiconductors and Expansionary Fiscal Policy
Most Regions Expected to Continue Improvement in the First Half of This Year
In the second half of last year, the regional economy showed slight improvement or remained steady across all regions, indicating an overall recovery compared to the first half. Service sector output increased, supported by improved consumer sentiment and government policies aimed at boosting consumption. However, construction sector output declined in most regions.
A visitor is shopping at an Olive Young store at Incheon International Airport on Yeongjong Island, Incheon. Photo by Yonhap News
According to the Regional Economic Report (January 2026) compiled by the Bank of Korea based on monitoring by its 15 regional branches in the second half of last year and available statistics, the Seoul metropolitan area continued its upward trend from the first half into the second half. This was attributed to the ongoing boom in the semiconductor industry and increased output in the finance and insurance sector, driven by a bullish stock market.
The southeastern region, which had underperformed in the first half of last year due to a decline in construction output, saw slight improvement in the second half. This was driven by continued strong shipbuilding production, increased output in the accommodation and restaurant sector, and growth in the transportation sector, boosted by rising tourist numbers. The Chungcheong region also shifted to a slight improvement, despite a decline in steel production, thanks to expanded output of memory semiconductors and premium displays.
The Honam region continued to experience sluggishness in petrochemicals and steel, but the recovery in service sectors such as retail and transportation helped ease the downturn, shifting from a slight decline in the first half to a steady performance in the second half. The Daegu-Gyeongbuk region, which had remained flat in the first half of last year, saw slight improvement in the second half, supported by the ripple effects of the Asia-Pacific Economic Cooperation (APEC) summit held in Gyeongju in October 2025 and growth in display sectors such as OLEDs.
In Gangwon and Jeju, the economy improved in the second half of last year due to growth in manufacturing-pharmaceuticals in Gangwon and semiconductors in Jeju-as well as increased service sector output driven by rising tourist arrivals. In particular, Jeju shifted from a decline in the first half to slight improvement in the second half.
For the first half of this year, the regional economy is also expected to show slight improvement or remain firm in most areas, supported by robust growth in key manufacturing sectors such as semiconductors and the government's expansionary fiscal policy.
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