People walk in Yongsan-gu, Seoul, on Monday, with Namsan Seoul Tower faintly visible through a haze of thick ultrafine dust. (Yonhap)
People walk in Yongsan-gu, Seoul, on Monday, with Namsan Seoul Tower faintly visible through a haze of thick ultrafine dust. (Yonhap)

South Korea’s economy limped to a 0.1 percent quarterly growth rate in the final quarter of 2024, bringing full-year growth to a disappointing 2 percent, according to the Bank of Korea on Thursday.

The fourth-quarter gross domestic product growth, sharply downgraded from the central bank’s earlier forecast of 0.5 percent -- and even lower than the 0.2 percent projection made by BOK Gov. Rhee Chang-yong last week -- underscores the major economic challenges ahead for the country amid the continuing political turmoil.

While annual growth of 2 percent marked an improvement from the 1.4 percent recorded in 2023, it fell short of the 2.2 percent projection made in November.

South Korea began 2024 on a comparatively positive note, posting 1.3 percent growth in the first quarter, extending a streak of five consecutive quarters of expansion. However, momentum broke in the second quarter, which saw a sharp contraction to negative 0.2 percent growth.

While the central bank had attributed the slump to a “surprise expansion” in the first quarter, the rebound was weak, with both the third and fourth quarters recording just 0.1 percent growth each.

The BOK pointed to weakened domestic spending and the struggling construction sector, exacerbated by the political instability following suspended President Yoon Suk Yeol’s botched imposition of martial law on Dec. 3, as the key factors behind the stagnant growth. In the fourth quarter, private consumption grew by 0.2 percent, down from 0.5 percent in the previous quarter. Facility investment dropped from 6.5 percent to 1.6 percent, and construction investment fell 3.2 percent. Exports rose by 0.3 percent, led by growth in IT products like semiconductors, while imports dropped 0.1 percent.

The real gross domestic income growth rate in the fourth quarter was 0.6 percent.

On an annual basis, the largest factor in the economic slowdown was private consumption, which grew by just 1.1 percent in 2024, the weakest growth since the -4.6 percent decline in 2020. Construction investment, which had rebounded to 1.5 percent growth in 2023, contracted by 2.7 percent in 2024. One silver lining was exports, which grew by 6.9 percent, the highest increase since 2021, helping to sustain the economy’s 2 percent annual growth rate.

On Tuesday, the central bank also signaled a potential downgrade of 0.2 percent or more to its 1.9 percent growth forecast for this year, citing worsened public sentiment from the ongoing political instability extending into the first quarter.