S. Korean economy continues to post 'solid' growth amid AI investment: KDI

The South Korean economy appears to be continuing to grow at a "solid pace" on the back of global investment in artificial intelligence (AI) infrastructure, a state-run think tank said Monday.

"Semiconductor production and investment continue to grow strongly, supported by robust external demand," the Korea Development Institute (KDI) said in its monthly economic assessment.

"Other sectors related to AI infrastructure investment also appear to be improving," it added.

In October, South Korea's outbound shipments soared 93.7 percent to a record US$115.3 billion on the back of strong global demand for semiconductors, coupled with continued investment by major technology companies in AI infrastructure.

"Exports of products closely linked to AI data center construction, including steel products, nonferrous metals and electronic devices, rose sharply," the KDI said in the report. "Equipment investment in machinery also grew at a solid pace overall."

The think tank, however, noted that economic growth appears to be "spreading only gradually across households," with consumption also improving at a "modest pace."

"Private consumption growth was relatively low in the third quarter as income gains from the semiconductor boom still showed no clear signs of spreading broadly across households, and high oil prices continued to weigh on household finances," the KDI added.

The think tank pointed out that South Korea's inflation remained high amid volatility in global oil prices, while higher market interest rates also constrained households' spending capacity.

South Korea's consumer prices rose 2.8 percent on-year in October, compared with 2.9 percent in September and 3.1 percent in August.

The KDI also warned against continued conflict in the Middle East, as well as escalating policy uncertainties in major economies.