The regional economy showed improvement in the first half of 2026, driven by strong performance in the semiconductor and service sectors, compared to the second half of last year. The Bank of Korea forecasts that the recovery in key manufacturing sectors, including semiconductors and automobiles, will continue into the second half, leading to slight improvements or stable conditions across most regions.
According to the Bank of Korea's 'Regional Economic Report' released on July 29, 2026, the regional economy improved primarily in the metropolitan area, Chungcheong, Daegu-Gyeongbuk, and Jeju. The southeastern and Honam regions, as well as Gangwon, showed generally stable conditions.
Manufacturing performance varied by region. The metropolitan area continued to see an increase in semiconductor production, bolstered by rising demand for AI server memory, following growth in the second half of last year. Chungcheong and Jeju also experienced production increases centered on semiconductors, while Daegu-Gyeongbuk saw growth in mobile phone components and steel production.
In contrast, the southeastern and Honam regions faced slight declines in production due to sluggishness in the petrochemical and refining industries, while Gangwon struggled with cement and automotive parts.
The Bank of Korea anticipates that manufacturing production in the second half will improve in the metropolitan area with semiconductors, in the southeastern region with automobiles and shipbuilding, in Honam with steel and semiconductors, and in Gangwon with medical devices and pharmaceuticals.
Service sector production increased across all regions. The metropolitan area saw slight growth due to the recovery in finance and insurance, retail, and accommodation and food services, driven by a favorable stock market. The southeastern, Chungcheong, Honam, Daegu-Gyeongbuk, Gangwon, and Jeju regions also maintained positive trends in retail and accommodation and food services, supported by improved consumer sentiment and an increase in domestic and foreign tourists.
The service sector is expected to continue its growth in the second half, driven by improved consumer sentiment and increased tourism demand, particularly in retail and transportation.
The construction industry, however, faced challenges in most regions. Rising construction costs due to instability in the Middle East and supply chain issues constrained construction activity in the southeastern, Chungcheong, Daegu-Gyeongbuk, and Gangwon regions, while the metropolitan area remained stable. Conversely, Honam and Jeju saw slight improvements in the public sector, influenced by increased execution of social overhead capital (SOC) budgets.
In the second half, construction is expected to recover somewhat in the metropolitan, Chungcheong, and Gangwon regions due to semiconductor factory expansions and the commencement of public infrastructure projects. The southeastern, Honam, and Daegu-Gyeongbuk regions are projected to remain stable, while Jeju may see a slight decline.
The real estate market continued to show regional disparities. In the first half, housing prices rose significantly in the metropolitan, southeastern, and Honam regions, while Gangwon experienced a shift to an upward trend. In contrast, Chungcheong and Daegu-Gyeongbuk saw a reduction in price declines, while Jeju experienced an increase in its decline.
Population movement between regions generally decreased. While net inflow to the metropolitan area declined, net inflow to Chungcheong increased, and Gangwon shifted to a net inflow.
Employment increased in the metropolitan, Honam, Gangwon, and Jeju regions, while growth slowed in the southeastern and Chungcheong regions, and Daegu-Gyeongbuk experienced a decline.
Jung Min-soo, head of the Bank of Korea's regional economic survey team, stated, "The regional economy is expected to maintain a generally favorable growth trend in the second half, although there will be differences between regions. While it may be difficult to expect growth rates as high as in the first half, the semiconductor sector will continue to perform well, and the automotive sector is expected to improve as temporary supply chain issues are resolved."
He added, "The service sector is also expected to benefit from improved consumer sentiment and government policy effects continuing into the second half, with most regions projected to show slight improvements or stable conditions compared to the first half."
* This article has been translated by AI.
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