South Korean Economy Grows 0.6% in Q2, 3% Annual Growth in Reach

SEOUL, July 23 (Yonhap) -- The South Korean economy grew 0.6 percent in the second quarter from a quarter earlier on robust exports, with 3 percent annual growth within reach, central bank data showed Thursday.

The country's real gross domestic product (GDP) -- a key measure of economic growth -- rose 0.6 percent in the April-June period from three months earlier, according to advance data from the Bank of Korea (BOK).

The second-quarter reading slowed from the previous quarter's 1.8 percent expansion, the strongest quarterly growth since the third quarter of 2020, when the economy expanded 2.2 percent.

The figure exceeded the BOK's May forecast of 0.2 percent growth.

From a year earlier, the Korean economy grew 3.7 percent in the second quarter, slightly slowing from the first quarter's 3.8 percent growth.

For the first six months of the year, the economy expanded 3.8 percent from a year ago, the BOK added.

"Despite concerns about impacts of the Middle East tensions and a base effect of sharp first-quarter expansion, the Korean economy continued to post solid growth in the second quarter," said Lee Dong-won from the BOK's statistics department during a press conference.

"Typically, if the growth rate in the previous quarter is very high, the growth rate in the following quarter drops significantly or turns negative due to a base effect," he said. "A 0.6 percent on-quarter increase indicates that the expansion has strengthened."

He said the economy is projected to grow 3 percent in 2026 as long as it posts no worse than a 0.1 percent quarter-on-quarter contraction in both the third and fourth quarters.

If realized, annual GDP growth of 3 percent would mark the first such expansion since 2021, when Asia's fourth-largest economy grew 4.5 percent.

Asia's fourth-largest economy contracted by 0.2 percent in the first quarter of 2025 before recovering with growth of 0.7 percent and 1.3 percent in the following quarters. But it backtracked in the fourth quarter, declining 0.2 percent amid weak facility investment and a downturn in the construction sector.

In detail, exports rose 1.4 percent from the previous quarter and imports increased 0.8 percent, while private consumption added 0.5 percent.

Net exports contributed 0.3 percentage point to the quarterly GDP growth, and private consumption contributed 0.2 percentage point.

Government spending edged up 0.2 percent, and facility investment increased 0.2 percent on a quarterly basis.

However, construction investment fell 0.2 percent.

Real gross domestic income (GDI) rose 15.6 percent on-year in the second quarter, marking the highest level since the first quarter of 1988, when it reached 16.4 percent.

While real GDP on-year rose 3.7 percent in the second quarter, real GDI, which reflects changes in terms of trade, jumped 15.6 percent in the second quarter, up from 13.2 percent three months earlier.

The BOK explained that rising energy prices stemming from the lingering Middle East tensions were offset by robust semiconductor exports, helping GDI expand at a faster pace.

In its latest outlook published in May, the BOK projected the economy to grow 2.6 percent in 2026.

But the central bank said last week that it would raise its growth forecast to some extent on stronger-than-expected chip-driven exports.

South Korea's outbound shipments reached a record US$102.25 billion in June, up 70.9 percent from a year earlier and surpassing the $100 billion mark for the first time. Exports of semiconductors nearly tripled to reach a record $44.82 billion.

In a separate report, the Ministry of Finance and Economy echoed the view that the latest GDP figures have further raised the possibility of South Korea achieving its annual growth projection of 3 percent for 2026.

"However, there are also downside risks, such as renewed tensions in the Middle East and U.S. tariff issues," the finance ministry said, citing uncertainties, including a blockade of the Strait of Hormuz and threats to disrupt shipping through the Red Sea.

The finance ministry said the latest report has also raised the possibility of Asia's fourth-largest economy achieving a gross national income (GNI) per capita of US$40,000 this year.

"We still need to take a wait-and-see approach, as GNI per capita reflects various factors, such as the Korean won's exchange rate against the U.S. dollar and economic growth in the second half."