Photo not related to article. [Herald DB]
Photo not related to article. [Herald DB]

The government said Thursday that South Korea's stronger-than-expected second-quarter real GDP growth of 0.6 percent has raised the likelihood of achieving 3 percent annual growth this year.

The Ministry of Economy and Finance, in a press release issued after the Bank of Korea published its Q2 GDP flash estimate, said strong export performance and solid domestic demand — supported by government policy — sustained robust growth momentum despite a high base effect from the previous quarter and the impact of the Middle East war.

The ministry said a sharp rise in real gross domestic income could expand corporate investment capacity and household purchasing power, potentially underpinning domestic demand going forward. It added, however, that downside risks remain — including renewed tensions in the Middle East and US tariffs — and pledged to closely monitor risk factors while focusing all efforts on sustaining growth momentum, including implementing policy tasks under the second-half economic growth strategy.

The ministry also said it would maintain its emergency response framework for the Middle East, ease inflationary pressures, support vulnerable groups affected by rising exchange rates and interest rates, and expand youth employment as part of broader efforts to stabilize livelihoods.

The Bank of Korea announced Thursday that real GDP grew 0.6 percent quarter-on-quarter in the second quarter on a flash estimate basis, beating the 0.2 percent forecast issued in May by 0.4 percentage points.

Quarterly growth rebounded sharply from minus 0.1 percent in the fourth quarter of last year to 1.8 percent in the first quarter, then remained in positive territory in the second quarter. Year-on-year growth came in at 3.8 percent in the first quarter and 3.7 percent in the second quarter. For the first half as a whole, the economy grew 3.8 percent — the highest first-half growth rate since the second half of 2021.

By sector, private consumption rose 0.4 percent, led by goods and services, while government consumption increased 0.2 percent. Construction investment fell 0.2 percent due to weakness in civil engineering, but facility investment edged up 0.2 percent, driven by machinery including semiconductor manufacturing equipment.

Exports grew 1.4 percent, led by semiconductors and machinery and equipment, while imports rose 0.8 percent, driven by automobiles and machinery and equipment.

Real gross domestic income surged 15.6 percent year-on-year, as improved terms of trade driven by higher semiconductor prices pushed the figure to its highest level since the first quarter of 1988 — a span of 38 years and three months.

The government also said the prospect of per capita gross national income reaching $40,000 this year has grown more likely. The Ministry of Economy and Finance said the second-quarter nominal growth rate is expected to be favorable given the real GDI performance reflecting terms of trade, raising the odds of hitting the $40,000 per capita GNI threshold. It cautioned, however, that multiple factors — including the won-dollar exchange rate and the second-half nominal growth rate — would affect the outcome, and that the situation warrants further monitoring.


y2k@heraldcorp.com