This year, local economies have shown improvement in the first half, 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 a slight improvement or stable conditions across most regions.
According to the 'Regional Economic Report' released by the Bank of Korea on July 29, the first half of this year saw economic improvements primarily in the metropolitan area, Chungcheong, Daegu, and Jeju regions. The southeastern, Honam, and Gangwon regions generally maintained 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. The Chungcheong and Jeju regions also experienced production increases centered around semiconductors, while the Daegu region saw growth in mobile phone components and steel production.
In contrast, the southeastern and Honam regions experienced slight declines in production due to sluggishness in the petrochemical and refining industries, while Gangwon showed weak performance in cement and automotive parts.
The Bank of Korea anticipates that manufacturing production in the second half will improve in the metropolitan area, focusing on semiconductors; in the southeastern region, on automobiles and shipbuilding; in Honam, on steel and semiconductors; and in Gangwon, on medical devices and pharmaceuticals.
Service sector production increased across all regions. The metropolitan area saw slight growth due to the strong stock market, which boosted the finance and insurance sectors, along with recovery in retail and accommodation services. The southeastern, Chungcheong, Honam, Daegu, Gangwon, and Jeju regions also maintained positive trends in retail and accommodation services, driven by improved consumer sentiment and an increase in domestic and foreign tourists.
Looking ahead, the service sector is expected to continue its growth in the second half, supported by improved consumer sentiment and increased tourism demand, particularly in retail and transportation.
The construction industry faced challenges in most regions. Rising construction costs and material supply issues due to instability in the Middle East constrained construction activity in the southeastern, Chungcheong, Daegu, and Gangwon regions, while the metropolitan area remained stable. However, the Honam and Jeju regions showed slight improvements in public sector construction, aided by increased budget execution for social overhead capital (SOC).
In the second half, construction activity 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 regions are projected to remain stable, while the Jeju region 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. The Chungcheong and Daegu regions saw a reduction in price declines, whereas Jeju experienced an increase in its decline.
Population movement between regions generally decreased. While net inflows to the metropolitan area declined, net inflows to Chungcheong increased, and Gangwon shifted to a net inflow.
Employment figures showed an increase in job numbers in the metropolitan, Honam, Gangwon, and Jeju regions, while the southeastern and Chungcheong regions saw a slowdown in growth, and Daegu experienced a decline.
Jung Min-soo, head of the Bank of Korea's regional economic survey team, stated, "While there will be regional differences, we expect the local economy to maintain a generally favorable growth trend in the second half. Given the high growth rate in the first half, it may be challenging to maintain the same level, but 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, "We also anticipate that the service sector will continue to benefit from improved consumer sentiment and government policy effects in the second half, with most regions showing slight improvements or stable conditions compared to the first half."
* This article has been translated by AI.
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