Korea Q3 GDP tops forecasts on chip exports

South Korea’s economy grew 1.0 percent in the third quarter of 2026 from the previous quarter, surpassing both the Bank of Korea’s 0.3 percent projection and market expectations. Real gross domestic product also increased 3.4 percent from a year earlier. The quarterly expansion strengthened from 0.6 percent in the second quarter and marked one of the firmest performances since early 2026.

GDP contracted 0.1 percent in the fourth quarter of 2025, then grew 1.8 percent in the first quarter and 0.6 percent in the second quarter. The result puts the economy on a stronger footing as policymakers assess momentum for the remainder of the year.

Third-quarter growth was driven by external demand and capital spending. Exports rose 2.3 percent from the previous quarter, supported mainly by semiconductors and machinery and electrical equipment. Imports increased 2.4 percent, reflecting higher purchases of crude oil and semiconductor manufacturing equipment.

Facilities investment jumped 4.1 percent, with spending concentrated in machinery, including semiconductor manufacturing equipment. Investment in intellectual property products climbed 2.3 percent as outlays on research and development and software increased. Manufacturing output expanded 2.0 percent, with gains in computers, electronic and optical products and machinery, while services grew 0.2 percent.

Real gross domestic income rose 3.4 percent quarter-on-quarter in the third quarter and surged 18.8 percent from a year earlier. The annual increase was the strongest since the fourth quarter of 1977, when real gross domestic income grew 19.0 percent. The income gains outpaced headline GDP growth during the period.

Despite robust export and investment performance, domestic demand showed signs of strain. Private consumption and household spending were at their lowest level in more than four years. A Bank of Korea survey showed consumer sentiment weakened in October, with expectations for both the economy and employment declining.

The expansion in the first three quarters of 2026 has been closely tied to the global artificial intelligence infrastructure boom and resulting demand for semiconductors. This backdrop helped lift GDP by 1.8 percent in the first quarter, which was the strongest quarterly growth since the third quarter of 2020, and continued to support activity in subsequent quarters.

At the same time, signs suggested chip-led momentum could be losing some strength, even as it remained the main engine of growth.