Seoul: The South Korean economy expanded at a rate of 1.8 percent in the first quarter of the year, marking the fastest growth in more than five years, as revealed by data from the Bank of Korea (BOK). This growth was buoyed by strong exports and firm domestic demand.
According to Yonhap News Agency, the real gross domestic product (GDP) of South Korea rose 1.8 percent in the January-March period from the previous quarter, surpassing an earlier estimate by 0.1 percentage point. This marks the strongest quarterly growth since the third quarter of 2020, when the economy registered a 2.3 percent increase. On an annual basis, the economy grew 3.8 percent, a significant rise from the 1.6 percent growth recorded in the last quarter of the previous year, and the highest on-year growth since the fourth quarter of 2021.
The BOK attributed the upward revision to the GDP to updated statistics on facility investment and private consumption. Despite a contraction of 0.1 percent in the fourth quarter of 2025 due to weak manufacturing, the economy rebounded in the first quarter driven by robust exports.
Exports rose 5.9 percent quarter-on-quarter, fueled by global demand for semiconductors, machinery, and automobiles. This was the largest increase since the third quarter of 2020. Facility investment surged by 6.6 percent, marking the highest growth in four years, while construction investment increased by 1.4 percent. Private consumption saw a 0.6 percent rise, though government spending declined by 0.4 percent. Domestic demand and net exports contributed 0.7 and 1.1 percentage points, respectively, to the GDP growth in the first quarter.
The BOK also revised data on the nation's gross national income (GNI) for 2025, which rose by 0.3 percent to US$36,963 per capita, slightly higher than the preliminary data released in March. The South Korean economy is anticipated to gain further momentum in 2026, supported by government stimulus and strong export performance, particularly in the semiconductor sector. The BOK revised its 2026 growth estimate to 2.6 percent, influenced by solid exports driven by a semiconductor super cycle.
International and local institutions have also adjusted their growth forecasts for South Korea, with the International Monetary Fund (IMF) and the Asian Development Bank (ADB) both projecting a 1.9 percent growth for this year. The Korea Development Institute (KDI) improved its growth projection for 2026 to 2.5 percent from the previous 1.9 percent.
In light of the strong economic performance, the BOK has hinted at a possible rate hike in the near future, with the next rate-setting meeting scheduled for July.