South Korea Q3 GDP Outpaces Forecasts on AI Chip Export Surge
The Bank of Korea reported 1.0 per cent quarter-on-quarter economic growth in the third quarter, exceeding expectations, though private consumption declined for the first time in nearly four years.
Q3 Growth Exceeds Expectations
South Korea's economy expanded by 1.0 per cent in the July–September quarter, according to advance estimates from the Bank of Korea (BOK) released on Tuesday. This quarter-on-quarter increase surpassed the 0.6 per cent growth recorded in the preceding three months.
The performance also exceeded a median forecast of 0.7 per cent from a Reuters poll of economists, as well as the BOK's own August projection of 0.3 per cent. On a year-on-year basis, gross domestic product (GDP) rose 3.4 per cent, following a 3.7 per cent increase in the second quarter, beating economists' expectations for a 3.0 per cent rise.
Export and Investment Momentum
The strong third-quarter expansion was primarily fuelled by a global boom in artificial intelligence (AI) chips, which significantly boosted exports and investments. Exports climbed 2.3 per cent, driven by solid demand for semiconductors, machinery, and electric equipment.
Facilities investment jumped 4.1 per cent, largely owing to increased spending on semiconductor manufacturing equipment. Lee Dong-won, director general of the BOK's economic statistics department, noted that semiconductors are estimated to account for approximately half of the nation's economic growth.
South Korea's exports reached over US$800 billion from January to September, surpassing last year's full-year record, and are on course to exceed US$1 trillion for 2026.
Persistent Domestic Weakness
Despite strong external demand, domestic consumption remained a drag on the economy. Private consumption fell 0.2 per cent in the third quarter, marking its first decline in nearly four years. This decrease was attributed to a slump in the stock market, which affected financial services, and reduced car purchases following strikes at major automakers.
A separate BOK survey released on Thursday indicated that consumer sentiment slightly weakened in October, reflecting a less optimistic outlook for household income and spending. Park Sang-hyun, an economist at iM Securities, highlighted that while exports and investments lead growth, private consumption lags due to labour market conditions and restrictive interest rates.
The Bank of Korea now projects the economy to grow 3.7 per cent for the full year 2026, an upgrade from its August forecast of 3.3 per cent, assuming fourth-quarter GDP maintains its third-quarter level. The central bank kept interest rates unchanged last week, following consecutive hikes in July and September.
However, the BOK maintained a hawkish stance, citing its upgraded growth forecasts and continued optimism regarding the country's export momentum. This indicates the central bank's focus on balancing external economic strength with persistent internal demand challenges as it calibrates future monetary policy decisions.
This article is journalism, not investment advice; consult a licensed professional before making financial decisions. Market data is indicative, may be delayed, and should be verified with your broker or exchange before use.
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