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Strong semiconductor demand and rising investment lift quarterly GDP growth above forecasts, while private consumption contracts for the first time in nearly four years
South Korea’s economy grew faster than expected in the July-September quarter as strong semiconductor exports and investment in chipmaking equipment benefited from the global artificial intelligence (AI) boom. However, a decline in private consumption highlighted the uneven nature of the recovery.
Gross domestic product (GDP) expanded 1 per cent in the third quarter from the preceding three months, accelerating from 0.6 per cent growth in the second quarter, according to advance estimates released by the Bank of Korea on Tuesday. The increase exceeded the 0.7 per cent growth forecast in a Reuters poll of economists.
On a year-on-year basis, the economy grew 3.4 per cent, slowing from 3.7 per cent in the previous quarter but beating economists’ expectations for 3 per cent growth.
AI boom boosts exports and investment
South Korea’s exports rose 2.3 per cent in the third quarter from the previous three months, led by semiconductors, machinery and electrical equipment. Imports increased 2.4 per cent over the same period.
Facilities investment climbed 4.1 per cent, supported by purchases of machinery, including equipment used in semiconductor manufacturing. The increase points to continued investment in production capacity as chipmakers respond to demand from technology companies building AI infrastructure.
The export momentum has also pushed South Korea towards a major trade milestone. The country’s exports exceeded $800 billion in the first nine months of 2026, surpassing its full-year record for 2025. Shipments are on track to cross $1 trillion this year, which would make South Korea the fourth economy to reach that level after the United States, China and Germany.
More from BusinessWeak consumer spending remains a concern
The strength in exports and business investment was not matched by household demand. Private consumption fell 0.2 per cent in the third quarter, marking its first contraction in nearly four years.
The divergence points to a key challenge for South Korea’s recovery. Strong overseas demand can lift industrial output, exports and investment, but it does not automatically translate into stronger household spending across the economy.
The extent to which export earnings and investment gains feed into domestic demand will be important for the sustainability of growth. A prolonged slowdown in consumption could leave the economy more dependent on the semiconductor cycle and global technology spending.
