South Korea’s Economy Beats Estimates as Chip Boom Continues

1ka3k6kd2x{2sp114jw1kb1}_media_dl_1.png Bank of Korea

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(Bloomberg) — South Korea’s economy grew faster than expected in the second quarter, driven by an artificial intelligence-fueled chip boom that supports the case for further interest-rate increases.

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Gross domestic product grew 0.6% in the three months ended June from the previous quarter, the Bank of Korea said Thursday, after expanding 1.8% in the January-March period. The reading was higher than the median estimate of a 0.4% expansion in a Bloomberg survey of economists.

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While a step down from the blowout first-quarter figures — which marked the fastest growth since late 2021 — Thursday’s figures extend a run of stronger-than-expected economic data that have prompted repeated upgrades to South Korea’s growth outlook by the government, the central bank and the International Monetary Fund.

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That will support the case for central bank officials to consider another rate increase in coming months after they hiked last week for the first time since 2023. A survey of economists showed they expect another move by October, with a minority predicting it could happen at the Aug. 27 board meeting.

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After the July 16 hike, Governor Shin Hyun Song said policymakers would retain a hawkish bias as inflation remains above target, economic growth strengthens and financial stability risks continue to build. The BOK said it would “substantially” raise its growth forecast when it meets next month.

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Economists had predicted a slower pace of growth in the latest quarter versus the start of the year as the war in Iran, which broke out in late February, rippled through the economy. South Korea is one of the world’s most energy import-dependent economies, leaving it acutely exposed to higher oil prices and import costs. That negative impact offset some of the gains from the semiconductor boom.

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Following an exceptionally strong first quarter, second-quarter GDP was also widely expected to moderate even as the broader growth story remained intact. Chipmakers struggled to expand production quickly enough to meet surging AI-related demand, limiting output growth despite robust orders.

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During the second quarter, exports rose 1.4%, driven by stronger semiconductor shipments, while imports rose 0.8% on gains in motor vehicles, machinery and equipment, the BOK said. 

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Chip shipments surged about 163% in the first half from a year earlier, already eclipsing the record annual level reached in all of 2025, according to the trade ministry. Computer exports also jumped 262%.

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Authorities have argued that AI-driven chip demand is increasingly spilling over into the broader economy through stronger corporate profits, investment, wages and tax revenue, cushioning the impact of external headwinds. 

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That also supported household spending. Private consumption rose 0.4% from the previous three months after a 0.6% increase in the prior quarter, while government spending climbed 2.2%. Facilities investment edged up 0.2% after jumping 6.6% in the previous quarter, whereas construction investment slipped 0.2% following a 1.4% gain.

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Recent data have reinforced signs of economic resilience, with exports buoyed by robust semiconductor shipments and the year-to-date current-account surplus already exceeding last year’s annual record. The strength of the recovery is also beginning to feed price pressures, with inflation accelerating in June to the fastest pace since late 2023.

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—With assistance from Molly Smith.

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