South Korea’s economy grows faster that anticipated, reinforcing central bank's hawkish stance
South Korea’s GDP grew 1.8% in Q1 2024, surpassing expectations and marking the fastest growth since Q4 2021, driven by AI-related exports and private consumption. The Bank of Korea revised its 2024 growth forecast upward to 2.6% and signaled potential rate hikes to 3.25% amid aligned economic indicators.
South Korea’s economy expanded by 1.8% in the first quarter of 2024, exceeding the initial estimate of 1.7% and marking the strongest quarterly growth since the fourth quarter of 2021, according to Bank of Korea data released Tuesday. The revision reflects stronger-than-expected infrastructure investment, private consumption, and a 5.9% surge in exports, fueled by booming semiconductor shipments tied to global AI demand. SK Hynix reported a fivefold increase in quarterly earnings in April, citing higher memory-chip prices driven by AI-related demand. Private consumption rose by 0.6%, and facilities investment grew by 6.6%, both upward revisions from earlier estimates, while government spending declined by 0.4%. Construction investment increased by 1.4%, contributing to the overall growth momentum. The Bank of Korea also raised its 2024 economic growth forecast to 2.6%, up from a prior projection of 2.5%, citing sustained momentum. The central bank’s dot plot indicated expectations for the benchmark rate to reach as high as 3.25% within six months, though two board members dissented in favor of raising rates last month. Bank of Korea Governor Shin noted that economic indicators—including inflation, growth, exchange rates, and housing risks—are now moving in the same direction, simplifying monetary policy decisions. The data reinforces the central bank’s hawkish stance amid robust economic activity.
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