Lee Hyo-jin covers the Bank of Korea, the banking industry and broader financial news. Her previous beats include foreign affairs, North Korea and general reporting on Korean society.
Korea's Q1 GDP grows 1.7%, nearly double forecast on surging chip exports
Containers are stacked at a port in Pyeongtaek, Gyeonggi Province, April 1. Yonhap
By Lee Hyo-jin
Consumer, biz sentiments turn gloomier as semiconductor-driven growth fails to benefit all
Despite risks stemming from the Middle East war, Korea's economy grew at its fastest pace in more than five years in the first quarter, lifted by a semiconductor export boom, central bank data showed Thursday.
According to preliminary data from the Bank of Korea (BOK), real gross domestic product (GDP) rose 1.7 percent in the January–March period from the previous quarter, nearly double the bank's forecast of 0.9 percent. It marked the strongest quarterly expansion since the third quarter of 2020 when the economy expanded 2.2 percent.
The economy shrank 0.2 percent in the first quarter of 2025, then rebounded with growth of 0.7 percent and 1.3 percent in the next two quarters, before slipping back into a 0.2 percent decline in the fourth quarter amid weak facilities investment and a slowdown in construction.
Manufacturing and exports — particularly semiconductors — accounted for the bulk of this year's first-quarter growth.
Facilities investment, including spending on chip equipment, jumped 4.8 percent, while private consumption rose 0.5 percent and government spending edged up 0.1 percent.
Exports surged 5.1 percent, led by IT products such as semiconductors, marking the fastest growth since the third quarter of 2020.
"Semiconductor manufacturing accounted for about 55 percent of total GDP growth in the first quarter. Earnings at major chipmakers far exceeded expectations, pushing overall growth well above the February forecast," said Lee Dong-won, director general of the BOK's economic statistics department, during a briefing.
"Private consumption served as a buffer, while strong semiconductor exports and investment to expand chip production capacity drove the expansion," he added.
The strong rebound in growth also points to Korea's heavy reliance on semiconductors, which are highly sensitive to global conditions. Some analysts warn that any shift in the external environment could weigh significantly on growth.
According to the Korea International Trade Association, exports rose 38 percent from a year earlier to $219.9 billion in the first quarter, with semiconductors accounting for about 35 percent of the total.
Meanwhile, the strong GDP figure stands in contrast to weakening sentiment indicators.
Separate BOK data released the same day showed consumer sentiment deteriorating sharply in April.
The Composite Consumer Sentiment Index fell to 99.2 from 107 the previous month, slipping below the 100 benchmark for the first time in a year. A reading above 100 indicates optimism, while a figure below that level reflects pessimism.
This marks the lowest level since April 2025, when the index stood at 93.6 amid political uncertainty following then President Yoon Suk Yeol's impeachment over the martial law fiasco.
The decline came as rising geopolitical tensions in the Middle East have heightened economic uncertainty and inflation concerns.
Business sentiment also remained subdued amid rising fuel prices and shipping costs linked to the Iran crisis.
According to a monthly survey by the Federation of Korean Industries, the business survey index for the country's top 600 companies by sales stood at 87.5 for April, remaining below the 100 benchmark for a second consecutive month.
A reading below 100 indicates pessimists outnumbering optimists, while a figure above that level signals the opposite.