Market Update: Economy on course to grow in 1 percent range from gov’t consumer coupons, semiconductor rebound – Full Analysis

 
Korea’s economy is on course to grow in the 1 percent range this year after 13 trillion won ($8.9 billion) in government consumer coupons lifted domestic demand and a semiconductor rebound strengthened exports, central bank data showed on Wednesday.
 
According to the Bank of Korea (BOK), real GDP expanded 1.3 percent in the July to September period from the previous quarter, based on preliminary estimates — up 0.1 percentage point from the advance figure released in October. Growth reached the 1 percent range for the first time since early last year, marking the strongest quarterly performance since late 2021.
 
 
Korea’s GDP shrank 0.2 percent in the first quarter, as political uncertainty following last year’s martial law crisis weighed on economic activity. However, it recovered and grew by 0.7 percent in the second quarter. 
 
“If fourth-quarter growth comes in between minus 0.4 percent and minus 0.1 percent, annual growth will be 1 percent. If it stays at zero or higher, annual growth of 1.1 percent is possible,” said Kim Hwa-yong, the director of national accounts at the BOK. “The on-quarter figure may soften because strong growth in the second and third quarters created a base effect.”
 
Revisions from the advance estimate show stronger investment across the board. Construction investment rose 0.7 percentage points, driven by nonresidential building work centered on chip fabrication plants. Intellectual property product investment increased by 1 percentage point due to higher spending for financial AI services, smart factories and cybersecurity software. Facility investment gained 0.2 percentage points, as companies bought more vehicles and general industrial machinery.
 
Domestic demand accounted for nearly all of the third-quarter expansion, contributing 1.2 percentage points of the 1.3 percent growth. Consumption had the largest impact, adding 0.9 percentage points as the government’s consumer coupons encouraged households to spend more. 
 

Customers look at goods at a traditional market in Seoul on Nov. 3. [YONHAP]

 
Private consumption rose 1.3 percent, supported by increased purchases of goods, such as cars and telecom devices, and stronger demand for services, including dining and medical care, the fastest growth since 2022. Government consumption also climbed 1.3 percent from increased spending on materials and national health insurance benefits, marking the sharpest rise since the fourth quarter of 2022.
 
Manufacturing output grew 1.5 percent on gains in transport equipment and computers, electronics and optical products. Construction expanded 0.7 percent on civil engineering activity. Service-sector output — including retail, accommodation, food, transport and finance — increased 1.4 percent.
 
Net exports contributed 0.1 percentage point to growth, slightly lower than the 0.3 percentage point contribution in the second quarter. Exports advanced 2.1 percent, led by semiconductors and automobiles, and imports rose 2 percent on stronger demand for machinery and cars.
 
“Income from exports must feed into corporate investment and domestic consumption to create a virtuous cycle,” said Lee Yoon-soo, a professor of economics at Sogang University. “If exports rely only on semiconductors, volatility in the business cycle will inevitably increase, so building growth engines beyond chips is also important.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY PARK YU-MI [[email protected]]