Since the start of the ninth elected provincial administration, Gangwon Special Self-Governing Province has been awash in talk of a bright future — advanced biotech, AI data centers, eco-friendly energy industries — but a new analysis finds the real economy is in dire shape.
The construction sector, which carries an outsized weight in Gangwon's economy, has been mired in a prolonged slump that analysts now identify as the single biggest drag on regional growth.
Voices of concern have begun to surface in Gangwon's industrial and business community, with some asking whether the provincial government is so focused on the future that it is ignoring the present.
A research note released Thursday by the Bank of Korea's Gangwon branch, titled "Assessment of the Prolonged Construction Slump in the Gangwon Region," found that the local construction industry has been unable to escape a long-running downturn, battered by falling permit and ground-breaking numbers, shrinking private investment and rising construction costs.
Construction accounts for 7.8 percent of Gangwon's total gross value added — well above the national average of 5.2 percent — yet the sector's contribution to growth has been negative every quarter since the second half of 2024, and the province's economic growth rate last year came in at minus 0.4 percent.
Even as tourism and other service industries expanded, the construction slump was enough to pull the overall growth rate into negative territory.
Forward-looking indicators are also deteriorating. Both permitted and ground-broken construction areas have fallen sharply, and rising construction costs are adding to the industry's burden while discouraging new investment.
There are currently 39 buildings in Gangwon Province where construction has been halted for two or more years — the second-highest count in the country.
In the housing market, Gangwon's apartment supply-demand index has remained below 100 continuously since 2022, signaling a persistent supply surplus. A high volume of unsold units after completion is also constraining private construction companies from pursuing new projects.
The public sector, by contrast, has expanded its share of construction activity on the back of large-scale social overhead capital projects. The public sector's share of Gangwon's total construction orders reached 64.5 percent in 2024–2025, far exceeding the national average of 26.6 percent.
The Bank of Korea also said a structural limitation is preventing those large public projects from fully benefiting local builders, as major construction companies from outside the province are winning a significant portion of the contracts.
In the short term, the Bank of Korea recommended cushioning the impact through financial support for sound construction firms, construction-cost indexing and expanded subcontracting to local companies. Over the medium to long term, it said the industry needs to strengthen the competitiveness of private builders, diversify supply chains and shift the construction market toward the maintenance and repair of aging infrastructure.
abc@heraldcorp.com
