South Korea's Q2 Economic Growth Slows, but Chip Exports Sustain Momentum

According to The Wall Street Journal, South Korea's economy, after a strong first-quarter performance, saw its growth momentum slow in the second quarter. However, resilient chip exports helped sustain economic strength, offsetting weak private consumption and sluggish construction investment.

Preliminary data released by the Bank of Korea on Thursday (23rd) showed that Asia's fourth-largest economy grew 0.6% in the second quarter (April to June) compared to the previous quarter, down from the revised 1.8% growth in Q1.

On a year-on-year basis, Q2 economic growth stood at 3.7%, slightly below Q1’s revised 3.8%.

The latest GDP figures exceeded market expectations. Economists had forecast South Korea’s Q2 GDP to grow 0.4% quarter-on-quarter and 3.4% year-on-year.

Exports remain the primary driver of economic growth. Strong semiconductor demand fueled by the artificial intelligence (AI) boom continues to support South Korea's export performance.

Home to major memory chip manufacturers Samsung Electronics and SK hynix, South Korea is one of the key beneficiaries of the global expansion in AI infrastructure.

In Q2, chip and machinery exports, along with investments in research and development and software development, maintained steady growth. In contrast, private consumption weakened, and construction investment continued to contract.

Although economic momentum slowed compared to the previous quarter, analysts and policymakers remain optimistic about export-led growth for the remainder of 2023.