How Did S. Korea's GDP Achieve 1.2% Growth in Q3?
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Synopsis
The South Korean economy has made a remarkable comeback, expanding by 1.2% in Q3, the highest growth in 1.5 years, driven by strong exports and rising private consumption. This article dives into the factors fueling this growth and what it means for the future.
Key Takeaways
- South Korea's GDP grew 1.2% in Q3, the fastest in 1.5 years.
- Private consumption rose 1.3%, driven by improved sentiment.
- Strong exports, especially in semiconductors, fueled growth.
- The economy is projected to expand 0.9% this year by BOK.
- Government stimulus measures played a crucial role in recovery.
Seoul, Oct 28 (NationPress) The South Korean economy has experienced its most rapid growth in one and a half years during the third quarter, driven by robust exports and increasing private consumption, as indicated by central bank data released on Tuesday.
The real gross domestic product (GDP), a crucial measure of economic performance, grew by 1.2 percent in the July-September timeframe compared to the preceding quarter, according to preliminary statistics from the Bank of Korea (BOK), as reported by Yonhap news agency.
This growth represents the fastest quarterly increase since the first quarter of 2024, when the economy also recorded a growth of 1.2 percent, up from a 0.7 percent on-quarter rise in the second quarter.
The third-quarter performance also exceeded the BOK's prediction of a 1.1 percent increase.
Year-on-year, the economy expanded by 1.7 percent in the third quarter, an acceleration from the 0.6 percent growth seen in the previous quarter.
The GDP had unexpectedly contracted by 0.2 percent in the first quarter, influenced by a domestic political crisis initiated by former President Yoon Suk Yeol's martial law declaration, alongside uncertainties stemming from US President Donald Trump's extensive tariff policies, which hampered consumer spending and curtailed export growth.
However, the economy has bounced back, bolstered by government stimulus initiatives and a surge in exports, particularly within the dynamic semiconductor sector.
Strong domestic demand and exports were the key drivers behind the economic growth in the third quarter.
Private consumption rose by 1.3 percent, marking the highest growth rate since the third quarter of 2022, while government expenditure increased by 1.2 percent, the largest since the fourth quarter of 2022.
Exports saw a 1.5 percent rise from the previous quarter, fueled by elevated global demand for semiconductors and automobiles.
Facilities investment surged by 2.4 percent, while construction investment saw a slight decline of 0.1 percent.
The BOK reported that domestic demand contributed 1.1 percentage points to economic growth, with net exports adding 0.1 percentage point in the third quarter.
"The surge in private consumption was spurred by improved consumer sentiment, government stimulus measures, the introduction of new smartphones and electric vehicles, as well as increased medical spending at general hospitals following the return of trainee doctors," stated BOK official Lee Dong-ton during a press briefing.
"Despite the ramifications of U.S. tariffs, exports—particularly those of semiconductors—have remained relatively stable. However, it is uncertain how other sectors, like automobiles, will respond to the new tariffs in the future," he added.
The annual growth rate for 2025 has the potential to exceed the BOK's target of 0.9 percent if fourth-quarter growth is at least -0.1 percent or better.
The BOK anticipates that Asia's fourth-largest economy will grow by 0.9 percent this year and by 1.6 percent in 2026, with a revised forecast expected in November.
Point of View
It is essential to recognize that while South Korea's economy has rebounded with notable growth, ongoing challenges from global trade dynamics and domestic policies must be monitored closely. The current performance is promising, but sustained growth will require strategic planning and adaptation.
NationPress
28/10/2025
Frequently Asked Questions
What factors contributed to South Korea's economic growth?
The growth was driven by strong exports, particularly in the semiconductor sector, rising private consumption, and government stimulus measures.
How does the current GDP growth compare historically?
The 1.2% growth in Q3 is the fastest quarterly expansion since the first quarter of 2024.
What is the Bank of Korea's outlook for the economy?
The BOK projects the economy to grow by 0.9% in 2023 and 1.6% in 2026, with a revised forecast expected soon.
What impact have US tariffs had on South Korea's exports?
While exports have remained relatively stable, it is uncertain how the new tariffs will affect various sectors moving forward.
What is the significance of private consumption growth?
Private consumption grew by 1.3%, marking the highest rate since Q3 2022, indicating improved consumer sentiment.
