Advance estimates for South Korean GDP show the economy contracted on the quarter in the three months to December, with domestic demand slowing and external demand weakening sharply. This is the first quarterly contraction since mid-2020. GDP fell 0.4 percent on the quarter after an increase of 0.3 percent previously, while year-over-year growth slowed from 3.1 percent to 1.4 percent, the weakest growth since the start of 2021. PMI surveys also showed contraction in South Korea's manufacturing sector over the course of the quarter.

The fall in headline GDP growth in the three months to December was broad-based among key expenditure components. Growth in private consumption expenditure slowed, increasing 0.6 percent on the quarter after advancing 1.2 percent in the three months to September, while investment spending rose 0.7 percent on the quarter after increasing 3.0 percent previously. Exports dropped sharply, down 5.8 percent on the quarter after advancing 1.1 percent previously, with imports falling 4.6 percent after an increase of 6.0 percent previously.

At their most recent policy meeting earlier in the month, officials at the Bank of Korea raised policy rates by 25 basis points. Although officials noted the weaker global outlook and expected domestic growth to slow, they judged that concerns about the inflation outlook warranted further policy tightening. Officials now expect GDP growth in 2023 will be below the forecast of 1.7 percent they made in November, though they have not yet updated their forecasts.

Fourth-quarter GDP is expected to fall a quarterly 0.2 percent and rise only 1.6 percent on the year, the latter nearly half of the third quarter's 3.1 percent rate.

GDP data are a comprehensive measure of South Korea’s overall production and consumption of goods and services. GDP serves as one of the primary measures of overall economic well-being. GDP calculates the total market value of goods and services produced in South Korea within a given period after deducting the cost of goods and services used up in the process of production. Therefore, GDP excludes intermediate goods and services and considers final aggregates only.

Gross domestic product (GDP) can be measured using three approaches, namely the production, income and expenditure approaches. The production measure of GDP is derived from firm level data and estimates the value added by all producing industries in the South Korea economy. The income measure of GDP is derived from earnings data and estimates how the income earned from these producing industries is then distributed throughout the economy as returns to labor, capital and government. The expenditure measure of GDP is derived from data estimating spending on goods and services by final end users and includes consumption, investment and exports minus the value of imports.

GDP is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Investors in the stock market like to see healthy economic growth because robust business activity translates to higher corporate profits. Bond investors are more highly sensitive to inflation and robust economic activity could potentially pave the road to inflation. By tracking economic data such as GDP, investors will know what the economic backdrop is for these markets and their portfolios. The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.