Bank of Korea Releases Preliminary Q2 Growth Figures
Real GDP Rises 0.6% while GNI Jumps 3.1%
The nominal growth rate, a key indicator for assessing the size of Korea’s economy, continued to post near double-digit gains in the second quarter. Compared to the same period last year, the growth rate was even higher than in the first quarter. This trend is attributed to the significant improvement in corporate performance, which was driven by surging semiconductor demand and sharp increases in product prices.
The Bank of Korea announced on September 8 that the nominal gross domestic product (GDP) growth rate (preliminary figure) for the second quarter rose by 9.2% compared to the previous quarter. This sustained strong growth follows the first quarter, when double-digit growth (10.5%) was recorded for the first time in 50 years.
Year-on-year, the growth was even greater, with a 26.4% increase in the second quarter, surpassing the first quarter’s growth rate of 17.1%. This marks the highest level in 47 years since the third quarter of 1979 (27.7%).
The nominal growth rate is calculated by reflecting the GDP deflator—which incorporates market prices—onto the real growth rate. While the real growth rate, which excludes the effects of inflation, shows how much the economy has genuinely expanded, the nominal growth rate is used to assess the overall size of the national economy.
The second quarter’s high nominal growth rate was largely due to total operating surplus (corporate profit minus labor costs) in core sectors such as manufacturing and finance and insurance, which increased by 18.5% from the previous quarter. Total operating surplus is the sum of corporate operating profits generated through production activities, and, led by semiconductors, this figure reached its highest level since such statistics were first compiled in 2010 as companies saw massive improvements in their earnings.
Compensation of employees, which encompasses wage increases for workers, rose by 1.9% during the same period, led mainly by the manufacturing sector.
Given that real GDP grew by only 0.6% in the second quarter, most of the nominal growth came from price increases. The GDP deflator, an index reflecting the general domestic price level, rose by 21.9% year-on-year in the second quarter. This was the highest level since the fourth quarter of 1980 (26.6%). Breaking it down further: the domestic demand deflator rose by 3.6% during the same period, the export deflator surged by 56.6%, and the import deflator increased by 21%.
The real growth rate, excluding price factors, rose by 0.6% quarter-on-quarter, remaining unchanged from the advance estimate released in July.
The Bank of Korea explained, “Construction investment and investment in intellectual property products were each revised up by 0.1 percentage point, reflecting data for the final month of the quarter that could not be used for the initial estimate, while government consumption was revised down by 0.1 percentage point.”
In detail, real gross national income (GNI) in the first quarter rose by 3.1% quarter-on-quarter, outpacing the growth rate. Specifically, real net factor income from abroad (the difference between income Korean nationals earned overseas and income foreigners earned domestically) fell from 1.16 trillion won to 790 billion won. However, real trade gains, driven by improved terms of trade, surged from 3.87 trillion won to 5.85 trillion won.
The gross savings rate climbed by 3.9 percentage points to 45.6% quarter-on-quarter. This rate represents the proportion of gross national disposable income that remains as savings rather than being spent. It includes not only household savings but also government savings and corporate retained earnings. This figure is the highest since statistics were first compiled in 1970.
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The household net savings rate stood at 9.7%, up 0.9 percentage points during the same period. The gross domestic investment rate was 24.2%, marking a 1.1% decline.
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