Korea posts steepest GDP growth in over 1 year in Q2 on solid exports, consumption recovery: BOK

Customers shop at a drugstore in Seoul, where a sign reads that cash handouts known as "consumption coupons" are accepted, July 22. Yonhap

The Korean economy grew at the fastest pace since early 2024 in the second quarter on the back of a recovery in private consumption and robust exports, 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 the previous quarter, rebounding from an unexpected 0.2 percent contraction in the first quarter, according to preliminary data from the Bank of Korea (BOK).

It marked the fastest quarterly growth since the first quarter of 2024 and exceeded the market expectation of a 0.5 percent gain.

On a year-on-year basis, the economy expanded 0.5 percent in the second quarter, compared with zero growth in the first three months of this year.

The economic contraction in the first quarter was driven by a domestic political crisis sparked by former President Yoon Suk Yeol's declaration of martial law, along with uncertainties stemming from U.S. President Donald Trump's sweeping tariff measures, which weighed on consumer spending and slowed export growth.

"While construction investment remained sluggish, exports performed better than expected thanks to solid semiconductor shipments in the second quarter. Private consumption also rebounded after domestic political uncertainty eased," BOK official Lee Dong-won said.

Containers are stacked at a port in Pyeongtaek, Gyeonggi Province, July 8. Yonhap

Exports increased 4.2 percent from three months earlier in the second quarter, led by strong global demand for semiconductors and petrochemical products.

Private spending went up 0.5 percent in the second quarter, as expenditures on automobiles and culture increased, among other things. Government spending gained 1.2 percent.

But facility investment dipped 1.5 percent, while construction investment also shed 1.5 percent.

The BOK said that net exports and domestic demand each contributed 0.3 percentage point to the economic growth in the second quarter.

The impact of the United States' aggressive tariff plan on Korean exports was limited in the second quarter, as the 25 percent reciprocal tariffs were postponed, according to the BOK.

"Front-loaded demand in anticipation of future tariff hikes also contributed to the export growth during the period," Lee said.

In April, Trump postponed the implementation of reciprocal tariffs on Korea and other trading partners for 90 days, later extending the deadline to Aug. 1. The Seoul government is currently going all-out in last-minute trade negotiations with Washington.

"Starting from the third quarter, the impact of U.S. tariffs is likely to be more pronounced. But domestic demand could improve led by the supplementary budget and a recovery in economic sentiment," the official added.

Earlier this month, the National Assembly passed an extra budget of 31.8 trillion won ($23.3 billion), following a 13.8 trillion-won stimulus approved in May.

The first extra budget mainly sought to support growth through government spending, while the second one is centered on boosting private consumption, according to the BOK. The latest supplementary budget includes a universal "consumption coupon" program.

The BOK earlier forecast the Korean economy to grow 0.8 percent this year, following a 2 percent on-year expansion in 2024.

The BOK official noted the country's economic growth may further slow should the U.S. reciprocal tariff rate for Korea be set at a level similar to that of Japan at 15 percent.

The central bank is scheduled to present its latest growth outlook for the year next month.