The Bank of Korea assessed that the capital region's economy improved more significantly than other areas during the first half of 2026, according to a regional economic report published on the 29th. The Chungcheong, Daegu-Gyeongbuk, and Jeju regions maintained long-term average growth levels during H1, while the Southeast, Honam, and Gangwon regions showed flat performance. The central bank divides the nation into seven regions—capital, Southeast, Chungcheong, Honam, Daegu-Gyeongbuk, Gangwon, and Jeju—for its analysis.
Semiconductor-Led Manufacturing Growth in Capital and Chungcheong Regions
Manufacturing production increased in the capital, Chungcheong, and Jeju regions centered on semiconductors during H1. The Daegu-Gyeongbuk region saw slight increases in mobile phone components and steel manufacturing. The Southeast and Honam regions experienced slight declines due to weak petrochemical and refining sectors, while Gangwon saw reductions in cement and auto parts production. The Bank of Korea stated that future manufacturing improvement is expected to center on semiconductors in the capital region, automobiles and shipbuilding in the Southeast, steel and semiconductors in Honam, and medical devices and pharmaceuticals in Gangwon.
Service Industry Production Rises Across All Regions on Consumer Sentiment
Service industry production increased slightly across all regions. The capital region saw growth in financial and insurance services due to favorable stock market conditions, alongside solid performance in wholesale/retail and accommodation/food services. Other regions benefited from improved consumer sentiment and increased domestic and foreign tourist arrivals. The central bank stated that service industry production is expected to continue showing favorable growth centered on wholesale/retail and transportation on the back of strong consumer sentiment.
Construction Sector Faces Cost Pressures from Middle East Crisis
Construction industry production remained sluggish in most regions. Cost increases and material supply instability stemming from the Middle East crisis exerted downward pressure, though the Honam and Jeju regions saw slight improvements in the public sector due to expanded social infrastructure budget execution. The Bank of Korea stated that construction production is expected to improve in the capital, Chungcheong, and Gangwon regions due to semiconductor factory expansions and public infrastructure groundbreakings. The Southeast, Honam, and Daegu-Gyeongbuk regions are expected to show flat performance, while Jeju is projected to see a slight decline.
Private Consumption and Investment Show Regional Variation
Private consumption increased slightly across all regions, supported by government policies such as high oil price damage support funds and improved consumer sentiment. Facility investment varied by region: it expanded in the capital, Chungcheong, Daegu-Gyeongbuk, and Jeju regions centered on semiconductor manufacturing, decreased in the Southeast and Gangwon regions, and remained flat in Honam.
Employment Increases in Most Regions, Daegu-Gyeongbuk Sees Decline
The number of employed persons increased in most regions, though the Southeast and Chungcheong regions saw smaller increases, and the Daegu-Gyeongbuk region shifted to a decline. Consumer prices expanded across all regions as petroleum product prices rose due to the Middle East crisis. Housing sales prices showed increased gains in the capital, Southeast, and Honam regions. Gangwon shifted to gains, while Chungcheong and Daegu-Gyeongbuk saw reduced declines. Jeju experienced larger declines. Net population inflow to the capital region decreased, while Chungcheong's net inflow increased. Gangwon shifted to net inflow. The Bank of Korea assessed that this reflects a sustained trend of youth moving in search of jobs rather than temporary factors.
Bank of Korea Forecasts Slight Improvement or Strong Flat Performance in H2
Regarding overall H2 economic conditions, the Bank of Korea stated that most regions are expected to show slight improvement or strong flat performance as major manufacturing sectors such as semiconductors and automobiles and the service industry grow solidly. Jeong Min-su, head of the Bank of Korea's regional economic research team, stated, "Although it won't be at the level of H1, which had very high growth rates, the entire country is expected to show favorable growth in H2. Semiconductors will continue to perform well, and automobiles will improve as the unusual temporary factor of parts supply disruptions in H1 is resolved."
FAQ
Which region showed the strongest economic performance in H1 2026 according to the Bank of Korea?
The capital region's economy improved more significantly than other areas during H1 2026, according to the Bank of Korea's regional economic report published on the 29th.
What factors are expected to drive economic improvement in H2 2026?
The Bank of Korea stated that major manufacturing sectors such as semiconductors and automobiles and the service industry are expected to grow solidly, leading to slight improvement or strong flat performance in most regions during H2.
