Seoul: The South Korean economy expanded at the fastest pace in 1 1/2 years in the third quarter, supported by solid exports and rising private consumption, central bank data showed Tuesday. Real gross domestic product (GDP), a key gauge of economic growth, rose 1.2 percent in the July-September period from the previous quarter, preliminary data from the Bank of Korea (BOK) showed.
According to Yonhap News Agency, this growth marked the fastest quarterly expansion since the first quarter of 2024, when the economy grew 1.2 percent, and was up from a 0.7 percent on-quarter increase in the second quarter. The third-quarter figure also surpassed the BOK's expectation of a 1.1 percent gain. On an annual basis, the economy expanded 1.7 percent in the third quarter, accelerating from a 0.6 percent increase in the previous quarter.
The country's GDP had unexpectedly contracted 0.2 percent in the first quarter due to a domestic political crisis sparked by former President Yoon Suk Yeol's martial law declaration, along with uncertainties from U.S. President Donald Trump's sweeping tariff measures, which affected consumer spending and export growth. However, the economy has rebounded with support from government stimulus measures and strong exports, particularly in the semiconductor sector.
Rising domestic demand and exports were key drivers of the economic expansion in the third quarter. Private consumption rose 1.3 percent, marking the fastest growth since the third quarter of 2022, while government spending increased 1.2 percent, the highest since the fourth quarter of 2022. Exports grew by 1.5 percent from the previous quarter, driven by strong global demand for semiconductors and automobiles.
Facilities investment saw a growth of 2.4 percent, whereas construction investment slightly decreased by 0.1 percent. The BOK indicated that domestic demand and net exports contributed 1.1 percentage points and 0.1 percentage point, respectively, to the third-quarter economic growth. BOK official Lee Dong-ton noted that the rise in private consumption was driven by improved consumer sentiment, government stimulus measures, the launch of new smartphones and electric vehicles, and increased medical spending following the return of trainee doctors.
Despite the impact of U.S. tariffs, exports, particularly semiconductor shipments, have remained relatively strong. However, there is uncertainty about how automobiles and other sectors will be affected by new tariffs in the future. The annual growth rate for 2025 could potentially exceed the BOK's targeted 0.9 percent if fourth-quarter growth is minus 0.1 percent or higher. The BOK projected Asia's fourth-largest economy to expand 0.9 percent this year and 1.6 percent in 2026, with a revised outlook expected in November.