Soaring semiconductor demand has driven South Korea’s economy to its fastest growth in over five years, quarterly data from the central bank showed Thursday, as the Asian powerhouse brushed off risks from the Middle East war.
The country’s gross domestic product (GDP) jumped 1.7 per cent in the January-March period compared to the prior three months, according to preliminary figures from the Bank of Korea (BOK).
It marked the fastest such expansion since the third quarter of 2020, when exports surged as Covid-19 lockdowns eased.
Growth was propelled by a 5.1 percent jump in exports, led mainly by “IT items such as semiconductors”, the BOK said.
“South Korea’s economy expanded much more than we expected,” Dave Chia, an economist at Moody’s Analytics, told AFP.
“Strong gains in semiconductor shipments underpinned robust exports,” he said.
“Fiscal support and the earlier easing of inflationary pressures have gradually firmed domestic demand.”
From a year earlier, the country’s economy grew 3.6 per cent, while posting a 1.6 percent expansion in the fourth quarter.
Government expenditure, meanwhile, grew only 0.1 per cent.
Kwon Hyo-sung of Bloomberg Economics said “the pace will be hard to sustain” in the second quarter.
“We expect growth to cool 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 passed a supplementary budget and taken other measures to avert a fuel supply crisis triggered by US-Israeli strikes on Iran at the end of February.
The attacks prompted Tehran to effectively close the Strait of Hormuz, choking off a crucial transit route for import-dependent Asian economies.
