South Korean construction sector sees sharpest decline since 1998 Asian financial crisis

South Korea's construction industry has recorded its most significant contraction since the 1998 Asian financial crisis, with the total value of construction work decreasing by 7.9% last year. This sharp decline, amounting to 29 trillion won, reflects the severe impact of high interest rates and persistent inflation on the sector throughout 2023.

The downturn is largely attributed to a substantial drop in construction contracts, which fell by 12.1% in 2023. Typically, there is a lag of one to one-and-a-half years between contracts and actual construction work (giseong), meaning the effects of the contract slowdown are still unfolding.

Domestic construction work saw a decrease of 6.0%, totaling 297 trillion won, which is also the largest reduction since 1998. Overseas construction projects experienced an even more pronounced decline of 20.8%, or 10 trillion won, representing the biggest drop in this segment since 2019.

The performance of the top 100 construction companies also mirrored the overall trend, with their combined work value falling by 8.2% to 106 trillion won. This segment saw decreases in both domestic (1.0%) and overseas (20.1%) projects. While domestic contracts saw a slight increase of 4.0% to 277 trillion won, a significant 28.1% decrease in overseas contracts, influenced by the high base effect of major Middle Eastern orders in 2024, contributed to the overall contraction.