South Korea's economy experienced its fastest growth in nearly six years during the first quarter, expanding 1.7% from the previous period. This performance significantly exceeded market expectations and was driven by a surge in chip exports fueled by global AI investment.
The Bank of Korea reported a 5.1% jump in overall exports, with "IT components including semiconductors" for AI infrastructure leading the gains. This marks the strongest quarterly pace since the third quarter of 2020.
The robust growth offers the Bank of Korea some flexibility with interest rates, currently at 2.50%. However, analysts note that geopolitical tensions and rising energy costs pose risks to future momentum.
Demand for Korean AI chips bolstered the economy, with major players like SK Hynix and Samsung Electronics reporting significant increases in first-quarter operating profits. This surge in demand is linked to global tech giants building AI data centers.
Private consumption rose 0.5% and facility investment gained 4.8% in the quarter. Year-on-year, the economy grew 3.6%, also surpassing forecasts.