Seoul: South Korea's nominal gross domestic product (GDP) surged at an unprecedented rate in nearly five decades during the second quarter, bolstered by robust artificial intelligence (AI)-related exports. The country is on track to attain US$40,000 in per capita gross national income (GNI), as indicated by central bank data.
According to Yonhap News Agency, the Bank of Korea (BOK) reported that the country's real GDP, a principal marker of economic growth, increased by 0.6 percent from the previous quarter in the April to June period. This figure aligns with the BOK's prior estimate, although adjustments were made with a 0.1 percentage point rise in growth for both construction investment and intellectual property investment, while government consumption growth was reduced by 0.1 percentage point.
As the fourth-largest economy in Asia, South Korea experienced a contraction of 0.1 percent in the last quarter of the previous year but rebounded with a 1.8 percent growth in the first quarter of this year. On an annual basis, the economy expanded by 3.7 percent in the second quarter, maintaining momentum from a 3.8 percent year-on-year growth in the first quarter.
The export sector saw a 1.3 percent increase from the previous quarter, driven by global demand for semiconductors, machinery, and equipment, although this was a deceleration from the 5.9 percent growth observed in the first quarter. Other areas such as facility investment and intellectual property investment saw growths of 0.2 percent and 3.4 percent respectively, whereas construction investment declined by 0.1 percent. Private consumption rose by 0.4 percent, with government spending increasing by 0.1 percent.
On a nominal basis, South Korea's GDP expanded by 9.2 percent during the quarter ending in June from the previous quarter and grew by 26.4 percent year-on-year, marking the most significant growth since the third quarter of 1979.
The gross operating surplus, indicating companies' production profits, surged by 18.5 percent from the previous quarter due to increases in manufacturing and finance. Meanwhile, the compensation of employees grew by 1.9 percent on-quarter, attributed to wage hikes in manufacturing.
Kim Hwa-yong from the BOK's economic statistics department noted that the surge in gross operating surplus is anticipated to lead to an increase in household income via bonuses and dividends, as well as an uptick in government income through taxes, thereby benefiting the broader economy.
The central bank's data further revealed an 8.8 percent rise in the country's GNI on a nominal basis from the previous quarter, and a 26.4 percent increase year-on-year. Real GNI also saw a 3.1 percent rise from the prior quarter and a 15.6 percent increase from a year earlier, marking the steepest growth since the fourth quarter of 1988.
The BOK projects that South Korea will achieve a per capita GNI of US$40,000 by 2026, barring any unforeseen external shocks. With the current growth trajectory, the central bank has revised its 2026 growth forecast to 3.3 percent, crediting strong exports driven by the ongoing semiconductor super cycle. The economy needs to grow by at least 0.2 to 0.3 percent in the second half of the year to meet this growth target.