South Korea's Q2 GDP beats estimates on chip export boom

South Korea's economy grew faster than expectations in the second quarter, driven by a semiconductor export boom that offset a decline in construction investment, advance estimates from the Bank of Korea showed on Thursday.

Gross domestic product expanded 0.6 percent in the April-June period from a quarter earlier on a seasonally adjusted basis, faster than a median estimate of 0.4 percent from a Reuters poll.

The result marks a sharp deceleration from the blistering 1.8 percent growth of the first quarter, but suggests chip-led growth can keep the economic engine running as policymakers embarked on a tightening cycle with a 25-basis-point hike in July.

"As long as we see quarterly (growth) rate that is higher than minus 0.1 percent in the second half, on an average, it would be possible to see annual growth of 3 percent" this year, a BOK official said in a news conference.

The central bank in May raised this year's growth outlook to 2.6 percent, which is due to be revised in August.

With the headline inflation figure at a 2-1/2-year high in South Korea, a majority of analysts see the central bank delivering at least one more rate hike before the end of the year to take the policy rate to 3.00 percent.

The BOK is expected to raise its key rate to 3.25 percent in the first quarter of 2027 and keep it there until at least the end of next year, according to median forecasts in a Reuters poll.

On a year-on-year basis, GDP expanded 3.7 percent, also beating a median estimate of 3.5 percent.

Growth was driven by a 1.4 percent gain in exports from a quarter earlier, led by shipments of "semiconductors, machineries and equipment," the central bank said.

Private consumption expanded 0.4 percent, while construction investment declined 0.2 percent from the first quarter.

Reuters

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