Stronger-than-expected semiconductor exports offset oil-price volatility, lifting second-quarter growth and bringing Korea’s fastest annual expansion in five years within reach.
Containers fill a storage yard in Busan Port Terminal on June 16.NEWS1
Korea’s economy posted a stronger growth rate than expected in the second quarter, as robust semiconductor exports offset unstable oil prices driven by geopolitical tensions in the Middle East.
Real GDP grew 0.6 percent from the previous quarter in the April-June period, according to advance estimates the Bank of Korea (BOK) released Thursday.
The figure was three times the BOK’s May forecast of 0.2 percent and 0.4 percentage points above it. The economy expanded 3.7 percent from a year earlier.
The strength in semiconductor exports appears to have cushioned two major growth drags: a base effect created by the first quarter’s sharp 1.8 percent rebound, and the oil shock caused by the Middle East war during the second quarter.
With growth beating expectations for a second consecutive quarter, annual growth in the 3 percent range is now within reach. If growth in the second half averages above minus 0.1 percent, Korea’s full-year rate would exceed 3 percent and reach its highest level in five years.
Exports increased 1.4 percent, led by semiconductors, machinery and equipment, while imports climbed 0.8 percent, mainly on automobiles and machinery. Because exports outpaced imports, net exports added 0.3 percentage points to overall growth.
Domestic demand contributed another 0.3 percentage points. Private consumption rose 0.4 percent on higher spending across both goods, such as home appliances, and services such as lodging and dining. Government consumption grew 0.2 percent, driven mainly by national health insurance spending.
Facility investment rose 0.2 percent, led by machinery used in semiconductor production.
Investment in intellectual property products surged 3.3 percent on strong R&D and software spending. It was the sharpest increase in 14 years and three months, since a 5.4 percent rise in the first quarter of 2012. Construction investment, however, fell 0.2 percent due to weak civil engineering activity.
By industry, manufacturing grew 1.2 percent, driven by strength in computers, electronics and optical equipment. The service sector expanded 1.1 percent, led by wholesale and retail, lodging and dining, finance and insurance, and information and communications.
Agriculture, forestry and fisheries contracted 7.1 percent, construction fell 1.9 percent, and electricity, gas and water services declined 1.3 percent.
Real gross domestic income (GDI), a measure of the public’s purchasing power, surged 15.6 percent from a year earlier as higher prices for major exports, including semiconductors, improved Korea’s terms of trade.
It was the largest increase in 38 years and three months, since a 16.4 percent rise in the first quarter of 1988. Real GDI increased 3.6 percent from the previous quarter, far outpacing GDP growth.
The rise means that Korea’s real purchasing power grew much faster than the actual volume of goods and services it produced, as the country earned better prices for its exports relative to what it paid for imports.
Financial markets are now watching how the latest data could shape monetary policy after BOK Gov. Shin Hyun-song said second-quarter real GDI growth would be among the main indicators considered when the bank decides whether to raise its benchmark interest rate next month.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
