SEOUL — A boom in semiconductor exports has driven South Korea's economy to its fastest expansion in more than five years, according to central bank data released Thursday, as the country shrugged off global uncertainties stemming from the Middle East conflict.
Gross domestic product (GDP) rose 1.7% in the first quarter of 2024 compared with the previous three months, the Bank of Korea (BOK) reported. That marks the sharpest quarterly growth since the third quarter of 2020, when a pandemic-era export rebound fueled rapid expansion.
The surge was led by a 5.1% jump in exports, particularly "IT items such as semiconductors," the BOK said in a statement.
"South Korea's economy expanded much more than we expected," said Dave Chia, an economist at Moody's Analytics. "Strong gains in semiconductor shipments underpinned robust exports. Fiscal support and the earlier easing of inflationary pressures have gradually firmed domestic demand."
On an annual basis, the economy grew 3.6% in the first quarter, accelerating from 1.6% expansion in the prior quarter. Government spending, however, increased by only 0.1%.
Despite the strong start to the year, some analysts caution that the pace may cool. "The pace will be hard to sustain in the second quarter," said Kwon Hyo-sung of Bloomberg Economics. "We expect growth to moderate as disruptions to energy supplies due to the Iran war weigh heavily on petrochemicals and spill over into broader manufacturing and services."
South Korea has taken measures to mitigate fuel supply risks, including passing a supplementary budget, after US-Israeli strikes on Iran at the end of February prompted Tehran to effectively close the Strait of Hormuz — a critical route for energy imports to Asia.
The conflict has raised concerns about global energy security and potential spillovers into trade and manufacturing, but for now, the chip-driven momentum has given Asia's fourth-largest economy a powerful boost.