Construction output has fallen year over year for 24 consecutive months, extending the longest decline since records began.
According to the Ministry of Data and Statistics (MODS) Korean Statistical Information Service (KOSIS) and the National Assembly Budget Office's "Industry trends & issues" on the 28th, construction output (constant prices) in April this year fell 5.5% from a year earlier. Building construction decreased 6.4%, and civil engineering fell 2.8%. Construction output has been on a decline for 24 months since May 2024.
This is the longest drop since related statistics began in July 1997. During the Asian financial crisis, the consecutive decline lasted seven months, and during the global financial crisis, 12 months—both surpassed this time.
The prolonged slump is attributed to soaring construction costs after COVID-19 and a freeze in the real estate project financing (PF) market. As liquidity surged worldwide during the COVID-19 period, raw material and labor costs rose, sharply pushing up construction costs, and after the Legoland incident in 2022, PF tightened, making financing difficult and prolonging the downturn, analysts said.
However, with leading indicators such as construction orders rebounding this year, some expect output to return to growth in the second half. But because this is largely a base effect from last year's very weak performance, the prevailing view is that even if the indicators improve, business sentiment in the industry will remain gloomy.
The Bank of Korea (BOK) also expects a slow recovery. In last month's economic outlook report, the BOK projected that construction investment this year will increase 0.6% due to base effects from last year (-9.8%). This is 0.4 percentage point lower than the February forecast (1.0%). It also expected next year's growth rate to reach only 1.5%.
Investments related to artificial intelligence (AI), such as semiconductor plants and data centers, and spending on social overhead capital (SOC) will partly ease the slump, but rising construction costs and supply disruptions of building materials are expected to leave the recovery weaker than initially forecast.