South Korean economy likely slowed in Q2 after robust Q1 growth: Reuters poll

By Renusri K

BENGALURU, July 21 (Reuters) – South Korea’s economy likely grew at a much slower pace in the second quarter compared to the first three months of the year, as robust export growth was offset by weakening domestic demand, a Reuters poll of economists showed.

Asia’s fourth-largest economy expanded by a seasonally adjusted 0.4% in the second quarter of 2026, according to the median forecast of 24 economists, a slowdown from growth of 1.8% in the January to March quarter, which was the highest in nearly six years. Forecasts for the survey taken July 7 to 20 ranged from 0.1% to 1.0%.

“Exports and investment are two key drivers for Q2 GDP, but domestic demand and consumption growth likely remain weak,” said Jeong Woo Park, Asia economist at Nomura. Consumers “looked very conservative about spending because outside chip sectors, other service sectors, manufacturing sectors, they continued to cut jobs.” 

“So because of that, this is very much like a K-shaped growth pattern. I think that limited some possible impacts from strong chip cycles,” Park said. 

Exports rose about 71% in June, their strongest pace in nearly half a century, as an AI-related spending boom helped semiconductor exports surge nearly 200% to $44.8 billion. The economy recorded a trade surplus of $138.3 billion in the first half of the year.

On a year-on-year basis, gross domestic product (GDP) was forecast to grow 3.5%, slower than the 3.8% expansion in the first quarter, based on the median estimate of 29 economists.

While the finance ministry recently projected this year’s economic growth at 3.0%, the highest in five years, up from 2.0%, economists in a separate Reuters poll expected growth to average 2.8% this year.

“The big picture though is that South Korea’s economy looks on track to achieve full-year growth in excess of 3%, led by AI-related tailwinds and supported by signs that spillovers into the wider economy are beginning to materialize,” said Khoon Goh, head of Asia research at ANZ. 

The Bank of Korea raised its benchmark interest rate for the first time in 3-1/2 years on July 16. Governor Shin Hyun Song said developments in all three areas — growth, inflation and financial stability — supported the hike. The central bank is expected to raise rates once more this year, according to a Reuters poll conducted before the meeting. 

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(Reporting by Renusri K; Polling by Pranoy Krishna and Pulkit Khanna in Bengaluru and Hyeyoon Cho in Seoul; Editing by Hari Kishan and Christian Schmollinger)

By Renusri K | Reuters | © Copyright Thomson Reuters 2026.