Political Crisis Hits South Korea Growth: Central Bank

South Korea's economic growth slowed in the last quarter of 2024, data from the central bank showed Thursday, as the country struggled with the fallout from impeached President Yoon Suk Yeol's brief declaration of martial law.

"GDP in the fourth quarter expanded 0.1 percent quarter on quarter and 1.2 percent on year," the central bank said in a statement, the lowest quarterly growth rate of the year after Yoon attempted to suspend civilian rule December 3.

For the full year, the economy grew by 2 percent, the central bank said, which was 0.2 percentage points below forecasts, amid ongoing political chaos which experts say has affected consumer confidence and domestic demand.

The two-percent expansion for Asia's fourth-largest economy marks a 0.6 percentage point increase from 2023 growth, according to data from the Bank of Korea, but the figures from the latest quarter show the economy sputtering.

In an earlier forecast for 2025 economic growth, the Bank of Korea cited the December 3 martial law declaration and December 29 Jeju Air plane crash that killed 179 as having "significantly dampened economic sentiment."

In that forecast the central bank also revised its full year 2025 growth forecast down to 1.6 to 1.7 percent, down from an earlier projection of 1.9 percent.

"Korea's economy continued to struggle in Q4 and we suspect that the weakness in activity could persist in the near term due to the ongoing political crisis," said Shivaan Tandon, Capital Economics.

"Domestic demand remains the main source of the weakness in the economy," he said in a note, pointing to slowing growth in consumer spending.

"The weakness of consumption in Q4 is in line with the latest consumer confidence and labour market data and suggests that perhaps the ongoing political crisis has already started to weigh on growth," he added.

The growth announcement follows the government's unveiling of a $250 billion support package for exporters, with growing concern over possible tariffs by US President Donald Trump.

South Korea, heavily dependent on exports and driven by key industries such as advanced chips produced by conglomerates Samsung Electronics and SK Hynix, saw exports rise by 6.9 percent in 2024 compared to 2023.

The volume of imports also recorded an annual increase of 2.4 percent.

President Yoon Suk Yeol briefly suspended civilian rule on December 3, deploying soldiers to parliament, but lawmakers voted the measure down and later impeached the president. Yoon is now being held for a criminal probe on insurrection charges and impeachment hearings.

Following the short-lived period of martial law, consumer sentiment fell to its lowest level since the Covid-19 pandemic.

Even after Yoon's impeachment, the won plunged against the dollar, and the country's unemployment rate recently spiked to its highest level since 2021.