South Korean media: South Korea's Q1 GDP grows by 1.7%... "Surprise growth" driven by chip market boom

Bank of Korea releases Q1 domestic gross product data

On the 23rd, the Bank of Korea released Q1 economic figures (actual, seasonally adjusted), showing a month-on-month growth of 1.7%, with chip-driven export expansion leading to economic growth significantly exceeding market expectations. According to the Bank of Korea's "Q1 Real Gross Domestic Product (GDP)," after a decline in Q4 2025 (-0.3%), South Korea's GDP rebounded just one quarter later, with exports rising by 5.1% month-on-month. The Bank had forecasted a growth rate of 0.9% in its February "Economic Outlook," making the actual figure roughly twice the prediction. The Q1 growth marks the highest level in five years and six months since Q3 2020, when pandemic restrictions were lifted and exports surged, with year-on-year growth reaching 2.6%.

Although the AI (artificial intelligence) boom originating in the United States has boosted chip exports and led to this "surprise growth," there remain disparities across industries. Equipment investment—including chip equipment—rose by 4.8%, but private consumption grew only slightly by 0.5% month-on-month, while government consumption increased by just 0.1%. Construction investment plummeted by 3.5% in Q4 2025, but rose by 2.8% in Q1 2026, supported by government initiatives such as new public housing starts.

Looking at economic activity categories, manufacturing GDP rose by 3.9%, primarily driven by computers, electronics, and optical equipment. After declining by 4.5% in Q4 2025, construction output rebounded by 3.9% in Q1 2026. Services grew by 0.3%. Within the service sector, financial and insurance services GDP rose by 3.9%, influenced by stock market performance, while transportation declined by 1.3%.

The Q1 growth was mainly fueled by manufacturing—especially semiconductors—and exports. Lee Dong-won (name), Director of Division 2, Economic Statistics Department at the Bank of Korea, stated: "Current statistics indicate that semiconductor manufacturing contributed approximately 55% to Q1 GDP growth." He added, "The strong performance of South Korea’s leading chip companies in Q1 far exceeded expectations, driving economic growth well beyond the forecast made in February." In terms of contribution to GDP growth, manufacturing accounted for 1.0 percentage point out of the total 1.7% increase. On a component basis, net exports (exports minus imports) contributed 1.1 percentage points, while domestic demand contributed 0.6 percentage points.

Despite the strong rebound in Q1, concerns persist over excessive reliance on semiconductors, which are deeply tied to global conditions. If external circumstances change, the economy may suffer significant setbacks. According to the Korea Trade Association, South Korea’s Q1 export volume reached $21.99 billion, up 38% year-on-year, with about 35% attributed to chip exports. Chip export growth soared by 145%, while other exports excluding chips grew only 12%.

Meanwhile, real national income (GDI) in Q1 2026 increased by 7.5% compared to Q4 2025—far surpassing GDP growth and marking the highest rise since Q1 1988 (8.0%). GDI reflects "real trade gains or losses" resulting from changes in import and export prices based on GDP, serving as an indicator of the people’s perceived economic well-being. In response, Lee Dong-won noted: "The sharp rise in prices of South Korea’s key export commodity—semiconductors—has significantly driven GDI growth."

Source: Chosun Ilbo

Original article: toutiao.com/article/1863315976848452/

Disclaimer: This article represents the personal views of the author