Robust exports drove economic growth in South Korea in the first half of 2024 (H1 2024), even as inflation and high interest rates weighed on demand. Inflation has eroded purchasing power and consumption while high interest rates have made household debt more difficult to manage. Regarding facilities investment, there was a temporary surge in semiconductor investments earlier this year, but overall investments remained weak due to the high cost of financing, the uncertain economic outlook, and domestic and international uncertainties. Construction investment saw a brief rebound at the beginning of the year as the prices of construction materials stabilized, but over the course of the year’s first six months construction investment remained slack due to the ongoing slump in the real estate market and concerns over project financing failures. In contrast, exports were a bright spot, with semiconductors leading the way, and steady increases in the automotive and shipbuilding sectors. Import growth was limited, contributing to a trade surplus that has lasted for 11 consecutive months as of April 2024.

Industrial production has recorded positive year-over-year (YoY) growth since August of 2023, bolstered by a recovery in mining and manufacturing production, which had been sluggish until the first half of 2023. Semiconductors, which represent the largest share of manufacturing production, began to rebound in H2 2023. Production and shipments of chips surged by 45 and 39 percent, respectively, in the first quarter of 2024 compared to the same period last year, significantly contributing to the improvement of the manufacturing economy.

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