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South Korea's GDP Soars 1.7% on Chip Boom, Fastest Growth Since 2020

South Korea's economy expanded at its quickest pace in five and a half years during the first quarter of 2025, with GDP growing 1.7% quarter-on-quarter. The surge was powered by a 5.1% rise in exports, primarily from strong global demand for semiconductors, which accounted for nearly half of the growth. Resilient private consumption and a sharp rebound in facility and construction investment also contributed to the performance, which nearly doubled the central bank's forecast. While the delayed impact of the Middle East conflict did not significantly affect Q1, officials warn of emerging uncertainties and remain alert to ensure macroeconomic stability.

Key Points: S. Korea GDP Growth Hits 5.5-Year High on Strong Chip Exports

  • 1.7% quarterly GDP growth
  • Strong semiconductor exports surge 5.1%
  • Domestic consumption and investment rebound
  • Growth nearly double central bank forecast
  • Middle East conflict impact delayed
3 min read

S. Korea logs fastest GDP growth in over 5 years on strong chip exports

South Korea's economy grew 1.7% in Q1 2025, its fastest pace in over 5 years, driven by robust semiconductor exports and domestic demand.

"Robust exports and investment to expand chip production capacity, along with solid private consumption, drove overall growth. - Lee Dong-won"

Seoul, April 23

Despite the ongoing crisis in the Middle East, the South Korean economy posted its fastest quarterly growth in 5 and a half years in the first quarter, supported by solid exports amid a semiconductor upcycle and resilient domestic demand, central bank data showed on Thursday.

The country's real gross domestic product (GDP) -- a key measure of economic growth -- rose 1.7 per cent in the January-March period from three months earlier, according to the preliminary data from the Bank of Korea (BOK).

It marked the strongest quarterly growth since the third quarter of 2020, when the economy expanded 2.2 percent. The figure was also nearly twice the BOK's forecast of 0.9 percent growth, reports Yonhap news agency.

Asia's fourth-largest economy contracted by 0.2 percent in the first quarter of 2025 before recovering with growth of 0.7 percent and 1.3 percent in the following quarters. But it backtracked in the fourth quarter, declining 0.2 percent amid weak facility investment and a downturn in the construction sector.

Overall, the economy expanded 1 percent in 2025.

"Robust exports and investment to expand chip production capacity, along with solid private consumption, drove overall growth," Lee Dong-won, director general of the BOK's economic statistics department, told a press briefing. "The semiconductor manufacturing sector accounted for nearly half of first-quarter GDP growth."

Exports rose 5.1 percent in the January-March period from the previous quarter on the back of strong global demand for semiconductors, marking the fastest growth since the third quarter of 2020.

Private consumption added 0.5 percent, while government spending edged up 0.1 percent. Facility investment increased 4.8 percent on a quarterly basis, and construction investment grew 2.8 percent.

On an on-year basis, the economy expanded 3.6 percent in the first quarter, up from the 1.6 percent growth in the previous quarter, the data showed.

Real gross domestic income (GDI) rose 7.5 percent on-quarter in the first quarter, marking the highest level since the first quarter of 1988, when it reached 8 percent.

"The impact of the Middle East conflict was limited through the first quarter, as shipments that had passed through the Strait of Hormuz continued to arrive in Korea until late March," Lee said. "But its effects are expected to begin emerging in April, though uncertainties remain high over relevant circumstances."

During a ministerial special task force meeting on inflation, Finance Minister Koo Yun-cheol said government policies to revitalize capital markets and support consumption, such as a fuel price cap scheme, also contributed to the sharp rebound in first-quarter growth.

"As peace talks in the Middle East are being delayed and uncertainty remains high until the conflict ends, the government will stay alert and make every effort to ensure macroeconomic stability and ease the burden on households," Koo added.

- IANS

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Reader Comments

S
Sarah B
While the numbers look great, the article mentions the Middle East crisis impact is yet to be fully felt. Global supply chains are so fragile. I hope our policymakers in India are watching this closely and building more resilience into our export plans.
P
Priya S
Good for them! But reading this makes me think - when will we see such headlines for India? Our growth is steady, but we need these kinds of explosive quarters, especially in manufacturing. The focus should be on creating global champions in key sectors, not just domestic consumption.
V
Vikram M
The semiconductor sector accounting for nearly half the growth is a wake-up call. The world runs on chips. South Korea has Samsung and SK Hynix. We need our own TSMC or Intel-level player. The PLI scheme is a start, but execution is key. Jai Hind!
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Rohit P
Solid numbers, but let's be honest, this level of growth is often volatile. They had a contraction just last quarter. Sustainable growth is what matters. India's path might be slower but hopefully more stable in the long run. Still, kudos to their export engine.
K
Kavya N
Interesting to see private consumption still growing there (0.5%). With all the global talk of slowdown, it shows consumer confidence. In India, we need to ensure rural demand picks up to complement our urban growth. A balanced economy is a strong economy.

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