Seoul: The South Korean economy experienced a 0.6 percent growth in the second quarter, driven by a notable recovery in private consumption and strong export performance, central bank data revealed. The real gross domestic product (GDP) rose in the April-June period, bouncing back 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, the growth exceeded market expectations, which anticipated a 0.5 percent increase. On a year-on-year basis, the economy expanded by 0.5 percent in the second quarter, compared to no growth in the initial three months of the year. The first quarter's economic contraction was attributed to a domestic political crisis and uncertainties arising from U.S. President Donald Trump's tariff measures, affecting consumer spending and export growth.
Exports saw a 4.2 percent rise from the previous quarter, fueled by strong global demand for semiconductors and petrochemical products. Private consumption increased by 0.5 percent, with higher expenditures on automobiles and cultural activities. Government spending also grew by 1.2 percent. However, facility and construction investments both decreased by 1.5 percent.
The BOK reported that net exports and domestic demand each contributed 0.3 percentage points to the second quarter's economic growth. The impact of U.S. tariffs on South Korean exports was limited, as the 25 percent reciprocal tariffs were postponed. The anticipation of future tariff hikes spurred front-loaded demand, further boosting export growth.
In April, President Trump delayed the implementation of reciprocal tariffs on South Korea and other trading partners, extending the deadline to August 1. Meanwhile, the South Korean government is actively engaged in trade negotiations with Washington. The BOK official noted that while U.S. tariffs could have a more pronounced impact starting in the third quarter, domestic demand might improve, supported by a supplementary budget and recovering economic sentiment.
The BOK forecasted a 0.8 percent growth for the South Korean economy this year, following a 2 percent expansion in 2024. The central bank is set to release its updated growth outlook next month. The BOK official warned that the country's economic growth could slow further if the U.S. reciprocal tariff rate for South Korea is set at a level similar to Japan's 15 percent rate.