South Korean GDP grows 1.0% in third quarter as exports and investment offset weak consumption

The South Korean economy maintained steady growth in the third quarter, bolstered by strong exports and investment despite a temporary contraction in private consumption. Increased exports, centered on semiconductors, and expanded facility investment supported economic growth, offsetting sluggish domestic demand.

According to the '2026 3/4 Quarter Real Gross Domestic Product (GDP) Preliminary Report' released by the Bank of Korea on the 27th, real GDP grew by 1.0% compared to the previous quarter. This represents a 3.4% increase compared to the same period last year. This growth trend is analyzed as a result of exports and investment leading economic growth, following the trend seen in the first half of the year.

Private consumption falls 0.2% due to "special factors" such as passenger car strikes and stock market adjustments

Looking at expenditure items, private consumption in the domestic sector decreased by 0.2% compared to the previous quarter, slowing the growth rate. The primary reasons were declines in both goods consumption, such as passenger cars and home appliances, and service consumption, including finance and food. However, the Bank of Korea explained that two special factors were reflected in this decline in consumption.

First was the impact of a passenger car manufacturer's strike, the first of its kind in 10 years. This led to delays in the delivery of completed vehicles, resulting in reduced passenger car consumption. Additionally, the impact of stock market adjustments led to a decrease in stock trading volume, which in turn reduced financial service consumption. The Bank of Korea estimated that if these special factors had not occurred, private consumption would have increased by 0.4% rather than decreasing by 0.2%. In other words, these special factors pulled down private consumption by approximately 0.6 percentage points.

Lee Dong-won, Director of Economic Statistics 2 at the Bank of Korea, stated, "Even excluding the special factors, it is difficult to see a strong improvement in private consumption as structural factors such as high household debt burdens and population aging remain latent." However, he projected, "From the fourth quarter, consumption is expected to gradually recover due to the resolution of passenger car consumption issues, dividend and bonus payments by semiconductor companies, and the expansion of government transfer expenditures."

Strong exports centered on semiconductors and facility investment drive 1.0%p of growth

Despite the sluggish private consumption, the total GDP growth rate reached 1.0% because investment and exports strongly drove the growth. In terms of contribution by expenditure item, exports played the largest role, contributing 1.1 percentage points to GDP growth. Exports increased by 2.3%, centered on semiconductors, machinery, and electrical equipment.

The contribution from investment was also high at 0.7 percentage points. In particular, facility investment, centered on machinery for semiconductor manufacturing, led growth with a 4.1% increase. Investment in intellectual property products also increased by 2.3% due to the expansion of software sectors such as semiconductor R&D and AI security. Construction investment increased by 0.7%, driven by civil engineering construction.

Government consumption increased by 1.9% compared to the previous quarter, showing a growth contribution of 0.3 percentage points. This was largely due to the concentrated execution of the budget in the third quarter, which had been saved during the second quarter in preparation for the possibility of a prolonged war in the Middle East. In particular, government spending was directed toward large-scale construction projects and facility investment for importing GPUs (Graphics Processing Units).

Gap between real GDP and real purchasing power widens due to improved terms of trade

On the production side, manufacturing led growth with a 2.0% increase compared to the previous quarter. The increase in computers, electronic and optical equipment, and machinery, including semiconductors, was decisive. The electricity, gas, and water business increased by 3.7%, centered on electricity, and the construction industry grew by 2.0% thanks to civil engineering. The service industry grew by only 0.1%, centered on information and communications and transportation.

Notably, the gap between real GDP and real GDP (national income), which represents real purchasing power, widened. Third-quarter real GDP increased by 3.4% compared to the previous quarter, significantly exceeding the 1.0% growth rate. Compared to the same period last year, it surged by 18.8%. This was because terms of trade improved as the prices of export goods, such as semiconductors, remained stable while the prices of imported goods, centered on crude oil and petroleum products, fell.

Regarding the third-quarter growth rate exceeding the original forecast (0.3%) by 0.7 percentage points, Director Lee Dong-won explained, "This result may act as a factor that raises the annual growth rate for this year by approximately 0.35 percentage points."

Source: original video (YouTube)