The Bank of Korea (Central Bank of Korea) released on August 31 a report on the impact of recent heavy rains and heat on growth and commodity prices, warning that extreme weather has become an important uncertainty factor impacting the Korean economy.

According to the report, extreme rainfall and high temperature in July had a significant impact on major agricultural products. Agricultural products such as spinach, perilla leaves, peaches, watermelons, etc. were affected by the disaster and reduced their production, and their quality declined. At the same time, the rise in seawater temperature has led to a decrease in fishing and breeding shipments of aquatic products with high demand such as squid, pushing the price of aquatic products to rise by 7.3% year-on-year in July. According to estimates by the Bank of Korea, this round of shocks will increase the consumer price index (CPI) by 0.3 percentage points in the third quarter and 0.1 percentage points for the whole year.

The impact of extreme weather is not limited to agriculture and catering industries. Construction workshops are frequently shut down or delayed, and the face-to-face type of service industry is subjected to rising costs and weak consumption pressures at the same time. South Korea¡¯s central bank said record-breaking three consecutive years of heavy rains and heat have significantly weakened economic momentum since 2023.

The report shows that between 2020 and 2025, the average annual number of heavy rain days (over 30 mm per hour rainfall) in South Korea reached 49 days, an increase of 23.9% compared to the beginning of this century; the average number of hot hot days (the highest daily temperature exceeds 33 ° C) was 67 days, an increase of 44.9% compared to the beginning of this century.

The report emphasizes that the impact of extreme weather has been limited not only to short-term fluctuations, but has also suppressed potential growth levels over the long term through loss of people and property, destruction of production facilities and decreased labor productivity.In the past few years, South Korea¡¯s GDP has dropped by an average of 0.1 percentage points in summer due to climate disasters, and climate risks are evolving from ¡°urgency shocks¡± to ¡°structural risks¡±.

The report pointed out that South Korea's existing infrastructure is mostly designed according to past climate conditions, and its vulnerability to extreme weather has become increasingly prominent. The report calls on the Korean government to incorporate long-term climate change scenarios into infrastructure planning and disaster response mechanisms, paying special attention to small and medium-sized cities and rural areas with low population density and limited financial capacity. If effective measures cannot be taken in time, extreme weather will continue to push up inflation and drag down growth prospects, and structural risks to the Korean economy will intensify.

South Korea¡¯s central bank warned of the increasing negative effects of tariff uncertainty on the South Korean economy.The trade data released on September 1 showed that under the influence of U.S. tariff policies, South Korea¡¯s exports slowed more than market expectations in August, exports grew by 1.3 percent, less than economists predicted by 3 percent, and grew significantly backwards than in July.

South Korea¡¯s central bank warned last week that even if a trade deal was reached, higher U.S. tariffs would still cause ¡°significant¡± economic shocks, noting in particular that South Korea faces a larger tariff hike and a higher degree of sensitivity to tariffs on specific products compared to competing exporters.