In the second quarter, South Korea's nominal GDP recorded a growth of 26.4%. Following a 3.6% increase in the first quarter compared to the same period last year, the second quarter saw a growth of 3.7%, continuing the upward trend. This growth was largely attributed to a significant increase in semiconductor export prices, which led to an unusually large surplus in the current account.
While assessments of the recent high economic growth rate vary, the Korea Development Institute has revised its forecast for this year's economic growth rate upward to 3.2%, a substantial increase compared to the previous year. This contrasts with the stagnation of global economic growth due to conflicts in the Middle East.
Despite these record economic growth figures and forecasts, uncertainty in the South Korean economy remains high. There is an increasing polarization across industries and regions, leading to rising prices and disparities in employment rates that directly affect the economic lives of citizens.
In fact, while major semiconductor companies have ramped up equipment investments and expanded production facilities, construction investment continues to stagnate. Despite the high economic growth rate, construction investment has only increased by 0.1% annually, effectively remaining flat.
Particularly, the surge in equipment investment concentrated in the semiconductor sector is creating disparities across regions, exacerbating regional polarization as construction investment declines.
With inflation persisting and uncertainties surrounding international oil prices due to instability in the Middle East, further price increases seem inevitable. Although employment rates have slightly improved, key industries such as manufacturing and construction have seen declines in employment. While employment rates for those over 50 have risen, youth employment rates have decreased, indicating ongoing instability in the job market.
Without a robust recovery in foundational industries like manufacturing and construction, tangible improvements in the economic conditions felt by citizens and genuine economic recovery will remain elusive.
The recent downturn in the construction industry poses a significant obstacle to national economic recovery. Following the housing supply expansion policies from the August 13 real estate measures, there have been heightened expectations for a recovery in the construction market due to AI data centers and semiconductor factories, with some large construction firms experiencing increased orders and improved profitability.
Conversely, medium-sized and small construction companies in regional areas are facing severe management crises due to the prolonged downturn in the construction market. As of September this year, the number of business closures among medium-sized and small construction firms has increased compared to the same period last year, and applications for rehabilitation procedures from regional medium-sized construction companies have been ongoing since the beginning of the year.
Although the government and local authorities have introduced emergency measures to address the construction market downturn, their effectiveness remains limited. Despite the announcement of these measures, the current construction market is experiencing significant increases in construction costs, particularly for residential projects. The stagnation in the private construction market, which accounts for over 75% of the total market, continues, resulting in a decline in the number of construction industry workers for 28 consecutive months.
To realize expectations for economic recovery, there is a pressing need for strong policy initiatives aimed at revitalizing the construction market, particularly in regional areas. Alongside increased investments related to AI, measures to stimulate construction investment that positively impact production and employment across regions must be developed.
Additionally, it is essential to actively consider support measures for the recovery of the housing market in regions and financial and tax incentives to help competitive medium-sized and small construction companies overcome their crises amid the ongoing downturn.
* This article has been translated by AI.
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