S. Korea's economy grows 0.6 pc in Q2 on solid exports, consumption recovery

Seoul, July 24 (IANS) The South Korean economy grew 0.6 per cent growth in the second quarter on the back of a recovery in private consumption and robust exports, central bank data showed on Thursday.

The country's real gross domestic product (GDP) -- a key measure of economic growth -- rose 0.6 percent in the April–June period from the previous quarter, rebounding from an unexpected 0.2 percent contraction in the first quarter, according to preliminary data from the Bank of Korea (BOK).

It exceeded the market expectation of a 0.5 percent gain, reports Yonhap news agency.

On a year-on-year basis, the economy expanded 0.5 percent in the second quarter, compared with zero growth in the first three months of this year.

The economic contraction in the first quarter was driven by a domestic political crisis sparked by former President Yoon Suk Yeol's declaration of martial law, along with uncertainties stemming from U.S. President Donald Trump's sweeping tariff measures, which weighed on consumer spending and slowed export growth.

"While construction investment remained sluggish, exports performed better than expected thanks to solid semiconductor shipments in the second quarter. Private consumption also rebounded after domestic political uncertainty eased," BOK official Lee Dong-won said.

Private spending went up 0.5 percent in the second quarter, as expenditures on automobiles and culture increased, among other things. Government spending gained 1.2 percent.

But facility investment dipped 1.5 percent, while construction investment also shed 1.5 percent.

The BOK said that net exports and domestic demand each contributed 0.3 percentage point to the economic growth in the second quarter.

The impact of the United States' aggressive tariff plan on South Korean exports was limited in the second quarter, as the 25 percent reciprocal tariffs were postponed, according to the BOK.

"Front-loaded demand in anticipation of future tariff hikes also contributed to the export growth during the period," Lee said.

In April, Trump postponed the implementation of reciprocal tariffs on South Korea and other trading partners for 90 days, later extending the deadline to Aug. 1. The Seoul government is currently going all-out in last-minute trade negotiations with Washington.

"Starting from the third quarter, the impact of U.S. tariffs is likely to be more pronounced. But domestic demand could improve led by the supplementary budget and a recovery in economic sentiment," the official added.

The BOK earlier forecast the South Korean economy to grow 0.8 percent this year, following a 2 percent expansion in 2024.

—IANS

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