South Korean economy's growth likely picked up in Q3 on chip exports: Reuters poll

South Korea's economy was expected to expand 0.7% in the July–September quarter, according to the median forecast of 16 economists. That would mark a modest acceleration from 0.6% growth in April–June. The figures are seasonally adjusted, so they account for regular seasonal patterns.

The pickup was linked mainly to booming semiconductor exports and investment connected with artificial intelligence. September exports reached a record $120.9 billion, while chip exports surged 262.8% from a year earlier. These gains helped offset uneven domestic demand, including softer household consumption.

The outlook was not uniformly strong. Forecasts for quarterly growth ranged from 0.5% to 1.6%, showing uncertainty about the recovery. On a year-on-year basis, GDP was expected to grow 3.0%, down from 3.7% in the previous quarter. The contrast points to growth that is improving, but increasingly dependent on chips.

South Korea's total exports rose 84% from a year earlier in September, reaching a record $120.9 billion. Semiconductor exports increased even more dramatically, climbing 262.8% to $60.3 billion. The figures show how strongly the country's trade performance was being powered by chips.

Semiconductors represented nearly half of all September shipments. This concentration matters because exports are a major channel through which South Korea's economy earns income and supports production. The chip surge therefore helped lift overall economic growth, even while domestic demand remained uneven.

The numbers also reveal a potential weakness. A large share of export growth came from one industry rather than from broad-based demand across the economy. Economists questioned whether export gains would spread to households and other businesses. The article notes that fiscal policy could help ease domestic pressures, but it does not provide a specific measure of that support.

Semiconductors are materials whose electrical conductivity can be controlled, allowing them to form the tiny switching and processing components inside electronic devices. They are essential to computers, phones, data centers, and AI systems. The article does not define them, but it shows their economic importance through South Korea's trade figures.

In September, semiconductor exports surged 262.8% from a year earlier to $60.3 billion. Chips accounted for nearly half of the country's total shipments, which reached a record $120.9 billion. Strong demand connected with AI therefore lifted exports and helped support GDP growth.

This success also creates concentration risk. The article says South Korea has become increasingly reliant on chip exports, while the benefits have not spread widely through the domestic economy. Economists warned that the economy is vulnerable because much of its growth is now driven by semiconductors. Broader growth would require stronger transmission from exports to domestic activity.

GDP measures total economic output, so a powerful export industry can raise it even when households are spending cautiously. South Korea's semiconductor sector expanded rapidly, supported by AI demand and investment. That strength increased production and foreign sales, but it did not automatically improve incomes, jobs, or confidence across the wider economy.

The article gives a clear example. September exports rose 84% year on year, while chip exports jumped 262.8% to $60.3 billion. Semiconductors made up nearly half of shipments. At the same time, high borrowing costs and elevated household debt weighed on consumption. The gains were therefore concentrated in the export sector.

Economists called the recovery increasingly uneven. Jeong Woo Park said an important question was whether export benefits would transmit to the domestic economy, with fiscal policy one possible channel. The article also notes structural weakness in the labour market and difficulty finding jobs for younger people as companies adopt AI more rapidly.

High interest rates raise the cost of borrowing for households. People with loans may face larger interest payments, while potential borrowers may delay mortgages, cars, or other purchases. Heavy household debt adds another constraint: more income must go toward servicing existing obligations instead of everyday consumption.

The article links these pressures directly to South Korea's weaker household spending. It says high borrowing costs and elevated household debt have weighed on consumption, even as semiconductor exports boomed. This creates a split economy. Export manufacturers can benefit from strong global chip demand, while indebted households remain cautious.

That split matters because consumption is a major part of domestic activity. If households cut spending, local businesses and services may see weaker demand, limiting how far export gains spread. The article says fiscal policy could help ease pressures, but it also reports that financial conditions were becoming less accommodative. The Bank of Korea kept its benchmark rate at 3.00% on Thursday.

The Bank of Korea's benchmark interest rate is the central policy rate used to influence financial conditions across the economy. The article reports that it stood at 3.00% and was held there on Thursday. In general, this rate matters because it influences the cost of loans and the return on saving.

When the rate rises, borrowing usually becomes more expensive. Households and companies may reduce spending or investment, slowing demand and growth. Tighter demand can also reduce pressure on prices, helping control inflation. When the rate falls, borrowing can become cheaper, potentially supporting consumption and investment, though it can also increase inflationary pressure.

The article says financial conditions were becoming less accommodative and that high borrowing costs were weighing on household consumption. The Bank raised its growth forecast to 3.3% for this year and 2.9% for next year. It does not state an inflation forecast or explain a planned rate path.

An economy is more vulnerable when one industry supplies a large share of its growth, exports, and investment. A downturn in that industry can then affect national output, trade, jobs, and government revenue at the same time. Diversified economies have more sectors to cushion such a shock, although the article does not compare South Korea with other economies.

South Korea's exposure is clear in September's figures. Semiconductor exports surged 262.8% to $60.3 billion and represented nearly half of total shipments. AI-related investment and chip demand helped lift growth, while domestic demand remained uneven. The same concentration that powers expansion can therefore make results less balanced.

Kelvin Lam said the Korean economy was very vulnerable because everything was now driven mainly by semiconductors. The Bank of Korea raised its growth forecasts, but economists still questioned whether export gains would reach households. A separate Reuters poll forecast 3.5% growth in 2026, though the article gives no industry breakdown for that estimate.