South Korea’s GDP growth beats forecasts amid AI boom

Asia’s fourth-largest economy grows 3.4 percent year-on-year amid strong semiconductor demand.

South Korea’s economy grew much faster than expected in the July-September quarter amid booming demand for chips used in artificial intelligence (AI).

Gross domestic product (GDP) expanded 1 percent on a quarterly basis, or 3.4 percent year-on-year, advance estimates released by the Bank of Korea showed on Tuesday.

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The Bank of Korea forecast in August that GDP would grow 0.3 percent in the third quarter.

Exports, which account for about 45 percent of South Korea’s GDP, rose 2.3 percent quarter-on-quarter, driven by semiconductors, machinery and electrical equipment, according to the central bank.

Investment in facilities and intellectual property rose 4.1 percent and 2.3 percent, respectively, while investment in construction edged up 0.7 percent.

Despite the robust growth in exports and investment, private consumption fell 0.2 percent.

The latest results put the South Korean economy well on track to achieve its biggest economic expansion in more than a decade.

South Korean Finance Minister Lee Hyoung-il said earlier this month that he expected growth to reach 3.4-3.6 percent in 2026, which would be the strongest performance since 2011, excluding the COVID-19 pandemic.

South Korea’s economy grew 1 percent in 2025, its slowest expansion since the pandemic.

Asia’s fourth-largest economy has capitalised on the AI boom amid a global shortage of memory chips.

South Korea’s exports in September surged 83.5 percent year-on-year to $120.9bn, with chips accounting for nearly half of all shipments, according to the Korea Customs Service.