Mar 27, 2023
South Korean Construction Deals Fall by Record Amid Slowdown
(Bloomberg) -- South Korea’s construction deals fell by a record margin last quarter as the property market cooled with rising interest rates weakening demand and inflation fueling costs.
The value of contracts nationwide slid 18.4% from a year earlier to 66.7 trillion won ($51 billion) with most of the falls in the private sector, the Ministry of Land, Infrastructure and Transport said Monday in a statement. The year-on-year drop was the biggest for comparable data back to 2015.
The lack of construction activity adds to factors weighing on the outlook for the economy. Gross domestic product contracted last quarter as construction investment and exports slumped while inflation increased expenses for both companies and consumers.
The situation is unlikely to improve this year significantly as property prices fall while the nation’s trade deficit has continued to widen. The Bank of Korea cut its growth forecast last month, reflecting a fall expected in construction investment this year.
Policymakers are particularly concerned that building firms and property developers may struggle to repay debt as the amount of unsold housing climbs and interest rates remain elevated. Local credit markets took a hit last year when a government-backed developer of Legoland Korea missed a debt payment.
©2023 Bloomberg L.P.