South Korea's economic growth surges amid a significant rise in exports

South Korea’s November exports remained strong, boosted by high demand for automobiles and semiconductors. This situation has provided reassurance to policymakers as they confront the rise of global protectionism.

Following November’s economic reports, data from the customs office published on Monday, December 1, highlighted that shipments adjusted for differences in working days surged 13.3% that month compared to the same period in the previous year. This rise took place following a 14% gain in the previous month.

Headline exports, on the other hand, surged 8.4% after a revised 3.5% rise in October. Imports also increased by 1.2%, resulting in a trade surplus of $9.7 billion.

South Korea’s economic growth surges amid a significant rise in exports

Sources noted that semiconductor exports in South Korea continued to drive the country’s growth, increasing by almost 39%. This growth has mainly resulted from a strong demand for AI and data centers. 

Apart from semiconductor exports, the car industry has also rebounded with a nearly 14% surge, more than offsetting the slowdown in sectors such as petrochemicals. 

Lim Hye Youn, an economist at Hanwha Investment & Securities Co, commented on this growth. The economist argued that exports seemed solid because both DRAM and high-value semiconductors were performing well. Therefore, he cautioned that if the country decided to exclude semiconductors, then the overall export situation would not be this good.

“Nonetheless, exports are performing better than anticipated despite American tariffs because companies have lessened their dependence on the US and expanded into other markets,” Lim added.

This positive trade report was released just a few days after the Bank of Korea(BOK) made public its decision to keep its benchmark rate steady at 2.5%. At this time, the central bank had also implemented some changes to its statement, indicating that it is less likely to cut rates further than it has in the past.

Still, officials demonstrate a divided stance on a decision regarding rate cuts. This situation was noted after the Governor of the Bank of Korea, Rhee Chang-yong, acknowledged that the board is evenly split on the outlook. According to information from the governor, three members supported a further reduction of interest rates, while three others anticipated that the interest rates would remain unchanged for now. 

In the meantime, it is worth noting that the central bank implemented slight improvements to its growth and inflation predictions through 2026. Sources close to the situation noted that, along with the rate decision, the BOK increased its 2026 growth outlook to 1.8% from the 1.6% estimated in August. It also raised its 2025 prediction to 1%, illustrating strong third-quarter output primarily driven by significant chip exports and a consistent rebound in private consumption.

South Korea-US trade deal sparks hope in the market 

As South Korea released its outstanding economic reports, it was confirmed that the country and America had completed a landmark deal last month to limit US President Donald Trump’s tariffs on imports of Korean goods to 15%. The agreement covered key goods, such as vehicles, which were initially subjected to a 25% levy.

This move aligns with Seoul’s earlier prediction that the auto rate will be retroactively reduced starting November 1. Meanwhile, the country’s ruling party submitted a special bill proposal to carry out its $350 billion investment promise last week.

Considering the situation, Rhee shared his forecast that outbound shipments and companies’ equipment investment will surpass expectations. He noted that this will happen, backed by the global increase in semiconductor production and the recent breakthrough in the trade agreement with Washington.

Several economists also weighed in on the matter. An example is Hyosung Kwon, a Korean economist. He mentioned that, “Since exports are steady, we believe the economy is set to grow by at least 1% in 2025 and more than 2% in 2026. Given this situation, the Bank of Korea doesn’t need to make any further changes to its policies.”

By destination, shipments to the US dropped by 0.2% as some sectors, such as auto parts and steel, struggled due to tariffs imposed on them. As for China, exports soared 6.9%. Shipments to the Middle East also increased by around  33% and those to Southeast Asia rose by 6.3%.

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