South Korea's Economy Grows 1.0% in Q3, Triple Bank of Korea Forecast, as Chip Boom Lifts Exports and Investment

South Korea’s economy grew 1.0% in the third quarter from the previous three months, more than triple the Bank of Korea’s (BOK) forecast, as a semiconductor boom lifted exports and corporate investment, The Korea Times reported. The central bank’s advance estimate for July–September, released on Tuesday (Oct 27), compares with the 0.3% quarterly expansion it had projected in August.

From a year earlier, gross domestic product rose 3.4%, edging down from 3.7% in the second quarter, according to The Asia Business Daily and Financial News. On a quarterly basis, the economy contracted 0.1% in the final quarter of 2025 before expanding 1.8% in the first quarter and 0.6% in the second quarter of this year.

Chips drive investment and exports

Facilities investment rose 4.1% on the quarter, led by machinery including semiconductor manufacturing equipment, while investment in intellectual property products such as R&D and software grew 2.3%, The Korea Times said. Financial News reported that investment in chip-making equipment was up 9.4% from a year earlier.

Exports climbed 2.3%, driven by semiconductors, machinery and electrical equipment, while imports rose 2.4% on crude oil and chip equipment. Government consumption increased 1.9% and construction investment grew 0.7% on civil engineering work. Domestic demand contributed 0.9 percentage point to growth and net exports 0.1 point.

The Seoul Economic Daily said computers, electronics and optical equipment accounted for an estimated 60% of year-on-year growth. Real gross domestic income jumped 18.8% from a year earlier, which the newspaper described as “the fastest increase in 48 years and nine months”, helped by higher semiconductor prices and lower import prices such as crude oil. By industry, manufacturing grew 2.0% while services slowed to 0.2% from 1.0% in the second quarter.

Consumers pull back

Private consumption fell 0.2%, its first decline since the fourth quarter of 2022, with spending down on passenger cars, home appliances, and financial and food services. Lee Dong-won, director general of the BOK’s Economic Statistics Department II, said one-off factors, including lower stock trading commissions and reduced car purchases, cut private consumption by 0.6 percentage point, The Asia Business Daily reported. Without those factors, consumption would have risen 0.4%, the central bank said.

Lee said private consumption could gradually recover from the fourth quarter of this year into the first quarter of next year.

What’s next

Cumulative growth through the third quarter stands at 3.6%, meaning the economy would still grow 3.6% this year even with zero growth in the fourth quarter, according to The Asia Business Daily. Lee said annual growth would come in at about 3.9% if the current trend holds, and 4% is possible if fourth-quarter growth reaches 1.4% or more.

The BOK has said it will substantially raise its 3.3% annual growth forecast in its revised economic outlook next month. Market forecasts are converging in the 3.6% to 3.8% range, the newspaper said, with Citibank chief economist Kim Jin-uk saying the bank had projected 3.8%. Analysts cited by The Seoul Economic Daily said the stronger data make it even less likely that the BOK will delay a rate increase at its November policy decision.

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