Seoul: The South Korean economy experienced its most rapid growth since early 2024 during the second quarter, driven by a recovery in private consumption and strong exports, as reported by central bank data on Thursday. The country's real gross domestic product (GDP), a vital indicator of economic progress, increased by 0.6 percent in the April-June timeframe compared to the previous quarter. This marks a rebound from a 0.2 percent contraction in the first quarter, according to preliminary data from the Bank of Korea (BOK).
According to Yonhap News Agency, this growth represents the quickest quarterly expansion since the first quarter of 2024, surpassing market predictions of a 0.5 percent rise. On an annual basis, the economy grew by 0.5 percent in the second quarter, contrasting with zero growth in the year's initial three months. The first quarter's economic decline was largely attributed to a domestic political crisis following former President Yoon Suk Yeol's martial law declaration and uncertainties from U.S. President Donald Trump's tariff measures, both of which negatively impacted consumer spending and export growth.
"Exports exceeded expectations due to solid semiconductor shipments in the second quarter, while private consumption rebounded after the resolution of domestic political uncertainties," stated BOK official Lee Dong-won. Exports grew by 4.2 percent from the previous quarter, fueled by strong global demand for semiconductors and petrochemical products. Private spending increased by 0.5 percent, with notable expenditures in automobiles and cultural activities, while government spending rose by 1.2 percent.
However, facility and construction investments both fell by 1.5 percent. The BOK noted that net exports and domestic demand each contributed 0.3 percentage points to the second quarter's economic growth. The anticipated impact of U.S. tariffs on South Korean exports was limited during this period, as the 25 percent reciprocal tariffs were delayed, according to the BOK. "Anticipated demand ahead of future tariff hikes also boosted export growth," Lee added.
In April, President Trump postponed the implementation of reciprocal tariffs on South Korea and other trading partners for 90 days, later extending the deadline to August 1. The South Korean government is actively engaged in last-minute trade negotiations with Washington. "From the third quarter onward, U.S. tariffs may have a more significant impact. However, domestic demand might improve, driven by the supplementary budget and a recovery in economic sentiment," the official mentioned.
Earlier this month, the National Assembly approved an additional budget of 31.8 trillion won (US$23.3 billion), following a 13.8 trillion-won stimulus in May. The first extra budget aimed to stimulate growth through government spending, while the second focused on enhancing private consumption. The latest supplementary budget includes a universal "consumption coupon" program.
The BOK previously forecasted a 0.8 percent economic growth for South Korea this year, following a 2 percent annual expansion in 2024. The BOK official warned that the country's economic growth might slow further if the U.S. sets the reciprocal tariff rate for South Korea at a level similar to Japan's 15 percent. The central bank is set to present its updated growth outlook for the year next month.