Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Korean economy faces new enemy: Extreme weather
Unharvested cabbage sits in a drought-stricken field in Gangneung, Gangwon Province, Friday. Yonhap
By Lee Yeon-woo
Heat waves, floods cut summer GDP by 0.1% in 2020s
Extreme weather has shaved 0.1 percent off Korea’s third-quarter GDP growth in the 2020s compared with the 2010s, the Bank of Korea (BOK) said Sunday, warning that climate-related shocks could also weigh on the country's long-term growth potential.
It said climate impacts have weighed on third-quarter growth between 2020 and 2025, as the season is typically the most vulnerable to extreme weather. It also noted that rising climate volatility has fueled inflation by driving up prices of agricultural, livestock and fisheries products.
"Over the past three years since 2023 (in particular), the repeated occurrence of record-breaking torrential rains and heat waves has likely intensified the negative shocks to the overall economy," the BOK said in its latest report. "Although this year’s summer season has yet to end, current trends suggest that 2024-level extremes are likely to occur again."
Sectors reliant on outdoor activity, including construction, agriculture, forestry, fisheries and in-person services, have been among the hardest hit, the report said.
In construction, extreme weather has slowed operations and, in some cases, halted projects entirely.
Agriculture and fisheries have suffered productivity losses. Notably, the report estimates that if the number of torrential rain days increases by 10, annual growth in the agriculture, forestry and fisheries sector could decline by as much as 2.8 percent.
Demand for in-person services, such as restaurants, has also weakened as rising agricultural and fishery prices, driven by climate volatility, push up input costs.
“A 10 percent rise in agricultural and fishery product prices has been found to lift dining-out costs by 0.9 percent three quarters later,” the BOK said. “So far, weak consumer demand has limited restaurants’ ability to pass on higher raw material costs. But as domestic demand recovers, there’s a risk food service prices could accelerate more sharply.”
The warning comes as Korea grapples with ongoing climate-related disruptions.
The number of days with heavy rainfall exceeding 30 millimeters per hour averaged 49 annually in the 2020s, up 23.9 percent from the 2000s. Heat waves also intensified, with the number of days posting maximum temperatures above 33 degrees Celsius averaging 67 per year — a 44.9 percent increase from the 2000s.
On Saturday, President Lee Jae Myung even declared a state of disaster in Gangneung, Gangwon Province, as a severe drought pushed the region to the brink of a water crisis.
"Extreme weather events may exert downward pressure on potential growth by causing loss of life and property, damage to production facilities and declines in productivity. This underscores the urgent need for systematic and preemptive policy responses," the central bank said.
To mitigate the growing economic fallout, the BOK urged policymakers to incorporate long-term climate scenarios into infrastructure planning and disaster response systems.
"In small towns and counties with low population density, limited fiscal capacity and a relatively lower potential for disaster prevention make it even more critical to strike a balanced policy mix," it added. "This balance must weigh the extent to which local governments can realistically strengthen their climate resilience against the financial burdens they are able to shoulder."