South Korea Q2 GDP Grows 0.6% Beating Expectations, Chip Exports Hit Record High in First Half
Alina Collins
South Korea's Q2 GDP grew 0.6% quarter-on-quarter, beating the 0.4% consensus, powered by chip exports that surged 163% in the first half — already topping the full-year 2025 record; the central bank hiked rates in July and markets expect another move before October.
How did the economy actually perform in Q2?
GDP rose 0.6% q/q, above the Bloomberg median forecast of 0.4% but well below Q1's 1.8% pace.
This means → the economy is still expanding, but the Q1 sprint — the fastest since late 2021 — has clearly cooled.
Exports led the way at +1.4% q/q; on the demand side, private consumption added 0.4% and government spending 2.2%.
Just how strong are chip exports?
First-half semiconductor exports jumped roughly 163% year-on-year, already surpassing the full-year 2025 record.
Computer exports over the same period surged 262%.
In plain terms = global AI demand is treating Korea's chip industry like an ATM — six months of shipments have already eclipsed a full year's tally.
Why wasn't growth even higher?
South Korea is one of the world's most energy-import-dependent economies; the Iran war that erupted in late February drove up oil prices and raised import costs.
At the same time, chipmakers cannot expand capacity fast enough to match the AI-driven demand surge, capping output growth.
This means → the growth dividend from the chip boom is being squeezed on two sides — higher energy costs and a production-capacity ceiling.
Why has the central bank turned hawkish and started hiking?
The Bank of Korea raised its benchmark rate by 25 basis points on July 16 — its first hike since 2023.
Governor Shin Hyun Song cited three reasons: inflation still above target, sustained economic strength, and accumulating financial-stability risks.
This reflects the BOK's view that the AI-chip windfall is transmitting through the chain of corporate profits → investment → wages → tax revenue into the broader economy, stoking price pressures.
What is the market watching next?
A Bloomberg survey shows the consensus expects another rate hike before October; a minority of economists bet it could come as early as the August 27 meeting.
The BOK also signaled it will "significantly" raise its full-year growth forecast at next month's meeting.
In plain terms = the second half boils down to two questions: whether the chip-export windfall can genuinely lift domestic consumption, and whether rate hikes arrive faster than the market expects.
Content is for reference only, not financial advice.