In the second quarter, Korea's economy recorded the highest growth rate in five quarters. The real gross domestic product (GDP) increased by 0.7% compared to the previous quarter, rebounding from negative growth in the first quarter, and the real gross national income (GNI) growth rate rose to the 1% range. This was due to exports, particularly in semiconductors, increasing more than previously expected, along with an improvement in trade conditions due to falling import prices for energy such as crude oil.
The Bank of Korea indicated that the GDP growth rate for the second quarter was upgraded from the earlier preliminary report, suggesting that the annual growth rate could exceed the forecast of 0.9%. However, uncertainties stemming from the United States, such as the anticipated 100% tariff on semiconductors, are viewed as significant obstacles to this economic recovery.
◇ GNI rises to over 1% for the first time in five quarters… GDP growth rate revised upward
According to the '2025 Second Quarter National Income (Preliminary)' report released by the Bank of Korea on the 3rd, the real GNI for the second quarter was recorded at 577.5 trillion won, marking a 1.0% increase compared to the previous quarter. This is the first time since the first quarter of last year (1.7%) that a growth rate of over 1% has been recorded, continuing a positive trend for four consecutive quarters.
GNI is a concept that sums up the income generated by all economic agents, including households, corporations, and the government, through production activities, reflecting the real purchasing power of the populace. The real GNI is calculated by adding the real trade profit, which reflects changes in trade conditions, to the real GDP and net factor income received from abroad (income earned abroad by nationals minus income paid to foreigners).
In the second quarter, components other than net factor income from abroad improved. The switch from negative to positive growth in the real GDP growth rate from the first quarter had a significant impact. The announced preliminary value for the second quarter real GDP was 575.9 trillion won, an increase of 0.7% compared to the previous quarter. This is 0.1 percentage points (p) higher than the previously announced preliminary estimate, marking the largest growth in five quarters.
The adjustment of the preliminary value from the preliminary estimate marks the first time in three years and three months since it was lowered by 0.1% in the first quarter of 2022. Looking at the detailed factors, both exports and imports increased compared to the preliminary report, and the decline in construction investment eased. Consumption remained the same as the preliminary report, while only the decline in equipment investment expanded.
Additionally, real trade losses decreased from 13 trillion won in the first quarter to 8.6 trillion won in the second quarter, offsetting the decline in net factor income from abroad (13 trillion won to 10.2 trillion won).
Kim Hwayong, Director General of the Bank of Korea's National Income Division, noted, "The growth in the second quarter was led by exports and consumption in the private sector," adding, "The decrease in real trade losses resulted from falling prices of imported goods, such as crude oil, which dropped more significantly than prices of exported goods like petroleum products, improving trade conditions."
◇ Is it possible to grow more than '0.9%'… U.S. tariffs remain the biggest variable
The Bank of Korea forecasts that this economic recovery trend will continue. While they maintain that there is no change to the annual growth rate forecast of 0.9% presented in the revised economic outlook on the 28th of last month, the upward revision of the second quarter growth rate is expected to slightly raise the annual growth rate.
Kim, the director general, said, "It is not expected that crude oil prices will rise rapidly in the second half, so the GNI growth rate is also likely to be maintained," adding, "However, it is uncertain whether the upward revision of the second quarter growth rate will contribute to raising the annual growth rate by more than 0.1 percentage points."
The Bank of Korea analyzed that to achieve the 0.9% growth forecast for this year, the average growth rate in the third and fourth quarters must exceed 0.6%.
However, this outlook does not take into account the anticipated U.S. tariffs on Korea's key export items such as semiconductors and pharmaceuticals. If a 100% tariff is imposed on semiconductors, as mentioned by former U.S. President Donald Trump, it will undoubtedly pose a significant obstacle to the economic recovery.
The impact of U.S. tariffs has also begun to come into play since August. If the prices of Korea's major export goods rise, trade conditions will deteriorate again.
A Bank of Korea official stated, "If semiconductor tariffs are confirmed, they may have some negative impact, but demand for semiconductors in the U.S. remains solid," adding, "Although net factor income from abroad fell slightly in the second quarter, it continues to increase, making it difficult to conclude that the recovery will stagnate."