South Korea economy likely returned to growth in Q1 - Reuters poll
Cranes and shipping containers are seen at Pyeongtaek port in Pyeongtaek, South Korea, April 2, 2025. REUTERS/Kim Hong-Ji
BENGALURU, April 21 : South Korea's economy likely returned to growth last quarter due to strong semiconductor exports and steady domestic demand, a Reuters poll of economists showed, although some warned the Middle East war could begin weighing on activity.
Asia's fourth-largest economy was projected to have expanded 1.0 per cent on a seasonally adjusted basis in January-March, rebounding from a contraction in the final quarter of 2025, according to the median forecast of 18 economists. Forecasts ranged from 0.2 per cent to 1.3 per cent.
On a year-on-year basis, gross domestic product (GDP) was forecast to have grown 2.7 per cent, accelerating from 1.6 per cent in the previous quarter, based on the median estimate from 22 economists polled April 15-20.
"If you look at the exports data, semiconductors have been the growth engine and are expected to remain so for the rest of the year. At the same time private consumption, investment data and some of the monthly indicators point to a strong performance in Q1," said Jeeho Yoon, senior economist at BNP Paribas.
Official data showed exports rose slightly in January and February before surging in March. Semiconductor exports jumped 151.4 per cent to a record $32.83 billion - nearly 40 per cent of total monthly exports - driven by memory chip prices and strong server demand linked to AI investment.
However, several economists said the U.S.-Israeli war with Iran, which has disrupted oil and gas supplies from the Middle East, could hurt growth. South Korea imports around 70 per cent of its oil from the Gulf.
"The conflict will probably have more of an impact on Q2 rather than Q1. We're in for a higher energy-price environment for the rest of the year," BNP's Yoon said, adding while this could weigh on growth and push up inflation in the near term, fiscal policy is helping cushion the immediate shock.
Economists in a separate Reuters poll this month forecast GDP growth to average 2.0 per cent this year, unchanged from pre-war expectations and slightly above the International Monetary Fund's (IMF) 1.9 per cent projection. Inflation is predicted to average 2.4 per cent in 2026, up from 1.9 per cent in a January survey.
