A survey of 13 domestic macroeconomic experts by Yonhap Infomax forecasts South Korea's Q2 GDP growth at 0.37% quarter-on-quarter, following Q1's 1.8% expansion. The projection is driven by strong exports led by the semiconductor sector and supported by the government's expansionary fiscal stance. This forecast exceeds the Bank of Korea's May estimate of 0.2% for Q2, reflecting robust performance in key indicators despite anticipated base effects from Q1's surprise growth.
Survey Shows Q2 Growth Forecast Range from -0.2% to 1.0%
Yonhap Infomax compiled forecasts from 13 macroeconomic experts on July 20, yielding a median Q2 growth estimate of 0.4% quarter-on-quarter. Individual forecasts ranged from -0.2% to 1.0%. On a year-on-year basis, experts projected Q2 GDP growth of 3.43%, with full-year growth forecast at 3.28%. The Bank of Korea stated in its July 16 economic assessment that Q2 growth is expected to exceed its May forecast of 0.2%, citing mitigation of Middle East supply shocks through supplementary budgets and solid export performance.
Exports Hit Record Highs in April, May, and June
South Korea's exports exceeded $85 billion in both April and May, setting monthly records for those periods. June exports reached $102.3 billion, marking the first time the country surpassed $100 billion in a single month. Lee Jung-hoon, researcher at Daishin Securities, forecasted Q2 growth at 1.0%, noting that despite weak industrial production indicators in April and May, the surge in June export volumes suggests continued high growth in Q2. Lee Seung-hoon of Meritz Securities projected 0.7% growth, stating that export expansion is spreading beyond semiconductors and computers to other categories, with Q2 export volumes rising approximately 10% year-on-year, approaching Q1 levels.
Analysts Cite Semiconductor Strength and Fiscal Expansion
Park Seok-gil, economist at JPMorgan, observed that export volume index growth significantly outpaced import volume index growth through June, indicating sustained robust growth led by exports and facility investment. Park forecasted 0.5% Q2 growth, explaining that while base effects from Q1's strong performance create some downward pressure, the data remains too strong for significant technical adjustment. Choi Ji-wook of Korea Investment & Securities, also projecting 0.5%, stated that exports and IT sector facility investment will primarily contribute to high economic growth in Q2, continuing from Q1. Wee Jae-hyun of Kyobo Securities anticipated that if fiscal expansion continues in the second half due to surplus tax revenue, both consumption and exports will show concurrent strength.
Base Effects and Domestic Demand Constraints Noted
Cho Yong-gu of Shinyoung Securities expected net exports to maintain high contribution levels due to semiconductor strength and AI investment demand, with private consumption, government consumption, and facility investment showing modest positive contributions. However, Cho noted that construction investment and inventory adjustments will likely show negative contributions, with base effects from Q1's strong growth playing a significant role. Choi Ji-wook added that private consumption appears to be at a flat level considering reduced credit card spending growth, with future consumption growth limited by high exchange rates and weak labor market conditions. Park Sang-hyun of iM Securities explained that while semiconductor export strength and expanded fiscal spending support domestic growth, delayed construction investment recovery and other domestic demand weaknesses will constrain the growth rate, with Q1's high base level also lowering the quarter-on-quarter growth figure.
Minority View Forecasts Negative Q2 Growth
Jung Sung-tae of Samsung Securities projected -0.2% Q2 growth, stating that the quarter is expected to show slight negative growth due to high oil prices and energy supply difficulties, followed by a rebound leading to full-year growth of 3.4%. Ha Gun-hyung of Shinhan Investment & Securities noted that despite strong semiconductor-led export volumes, a significant portion of export increases were met through inventory depletion, as confirmed by consecutive industrial production declines in April and May and semiconductor volume adjustments, with inventory changes expected to offset growth. Ha added that while government consumption and construction will continue positive contributions through the first supplementary budget execution, facility investment adjustments and high oil price-driven inflation burdens will constrain private consumption recovery.
FAQ
What is the forecasted Q2 GDP growth rate for South Korea?
A survey of 13 macroeconomic experts by Yonhap Infomax forecasts South Korea's Q2 GDP growth at 0.37% quarter-on-quarter, with individual forecasts ranging from -0.2% to 1.0% and a median of 0.4%.
Why do analysts expect positive Q2 growth despite base effects?
Analysts cite strong export performance led by the semiconductor sector, with monthly export records set in April, May, and June (reaching $102.3 billion), along with the government's expansionary fiscal policy supporting growth despite anticipated base effects from Q1's 1.8% expansion.
What factors could constrain Q2 economic growth?
Experts identify delayed construction investment recovery, potential private consumption weakness due to high exchange rates and labor market conditions, inventory adjustments offsetting export gains, and base effects from Q1's strong 1.8% growth as key constraining factors for Q2 GDP expansion.
