South Korea’s early August exports extend gains on semiconductor boom, supporting rate hike case

SOUTH KOREA’S exports maintained their strong growth in early August, offering further evidence that artificial intelligence-driven demand is powering the economy and supporting the case for further interest rate hikes.

Exports adjusted for working-day differences climbed 61.5 per cent from a year earlier in the first 20 days of August, according to customs office data released on Friday (Aug 21). That compared with an initially reported 62.9 per cent increase during the same period in July.

On an unadjusted basis, shipments gained 56 per cent, while imports rose 19 per cent, resulting in a trade surplus of nearly US$14 billion.

Semiconductors continued to lead the gains, with exports soaring 198.8 per cent from a year earlier. Shipments of computer-related products jumped 242.1 per cent, while automobile exports fell about 45 per cent.

The figures will serve as a timely input for the Bank of Korea’s (BOK) Aug 27 policy meeting, with economists divided over whether the next move should come in August or in October. The BOK unanimously raised its benchmark interest rate by 25 basis points to 2.75 per cent in July and has maintained a tightening bias.

The data suggest the export boom remains firmly intact as investment in AI and data centres drives global demand for South Korea’s memory chips and other technology products. That strength has helped the economy absorb the drag from higher energy costs and uncertainty surrounding the conflict in the Middle East.

The semiconductor boom is generating unusually large gains for the broader economy. Export prices surged about 49 per cent in July from a year earlier, the most since March 1998, while its terms of trade improved by a record 24.7 per cent, the BOK said last week. 

An export windfall has also bolstered the country’s external position. The current account surplus reached a record US$49.7 billion in June, with the goods balance climbing to an all-time high as exports exceeded US$100 billion for the first time.

Continued strength would reinforce the South Korean central bank’s assessment that economic momentum remains robust enough to withstand higher borrowing costs and could tip the balance toward a back-to-back rate increase on Aug 27.

SEE ALSO

South Korea's SK Hynix weighs Japan chip plant, multi-trillion won investment: report

South Korea inflation cools to three-month low in July, but risks remain

South Korea forecasts 2026 economic growth at 5-year high on AI chip boom

Minutes from the July meeting showed policymakers broadly agreed further rate increases would be needed, while leaving the timing and pace dependent on inflation, growth and financial stability. 

Headline inflation slowed more than expected to 2.8 per cent in July, but core inflation accelerated to 2.6 per cent, suggesting underlying price pressures remain firm. The economy expanded a stronger-than-expected 0.6 per cent in the second quarter from the previous three months.

By destination, exports to China increased 118.6 per cent, while shipments to the US rose 59.4 per cent. Exports to Hong Kong and Vietnam jumped 245.5 per cent and 67.4 per cent, respectively. BLOOMBERG