Korean Q2 GDP tops estimates as semiconductor exports surge
Strong semiconductor shipments propelled South Korea's second-quarter growth past forecasts, reinforcing expectations for further monetary tightening to curb inflation.
South Korea’s economy expanded 0.6 per cent in the second quarter, exceeding analyst forecasts of 0.4 per cent. On a year-on-year basis, gross domestic product grew 3.7 per cent, ahead of the 3.5 per cent median estimate. The advance estimates from the Bank of Korea published on Thursday confirm a sharp deceleration from the 1.8 per cent surge recorded in the first quarter.
The quarterly resilience was primarily export-driven. Overseas shipments rose 1.4 per cent from the prior three months, powered by semiconductors, machineries and equipment. This strength in the trade sector offset a 0.2 per cent drop in construction investment, while private consumption provided a steady contribution with a 0.4 per cent gain.
For market participants, the data underscores a bifurcated economy where technology exporters are thriving even as domestic building activity falters. The robust headline figure also provides policymakers with sufficient runway to prioritise inflation control over growth support. The BOK has already signalled this shift, launching a tightening cycle with a 25-basis-point rate hike in July.
Price pressures remain elevated, with headline inflation sitting at a two-and-a-half-year high. Consequently, a majority of analysts anticipate the central bank will deliver at least one more rate hike before the end of the year to lift the policy rate to 3.00 per cent. Median forecasts indicate the benchmark will climb to 3.25 per cent in the first quarter of 2027 and stay there until at least the end of next year.
The central bank revised its 2024 growth outlook up to 2.6 per cent in May, with another update scheduled for August. "As long as we see quarterly (growth) rate that is higher than minus 0.1 per cent in the second half, on an average, it would be possible to see annual growth of 3 per cent" this year, a BOK official said in a news conference. This baseline suggests the semiconductor boom can continue propelling the economy even as monetary conditions tighten.
