Memory supercycle brings $40,000 income milestone closer
South Korea's economy grew 1.8 percent in the January-March period, as booming chip exports fueled the strongest expansion since 2020, central bank data showed Tuesday.
If sustained, the pace of growth could bring the country's per capita income to $40,000 sooner than expected.
The country's real gross domestic product expanded 1.8 percent from the previous quarter, 0.1 percentage point higher than the Bank of Korea's preliminary estimate in April. The 1.8 percent expansion was the strongest quarterly performance since the third quarter of 2020.
The stronger-than-expected growth was largely fueled by the semiconductor industry, with surging artificial intelligence-related demand driving chip exports and investment.
Exports, a major pillar of GDP, climbed 5.9 percent on shipments of information technology products, particularly chips, while manufacturing output and facility investment advanced 3.9 percent and 6.6 percent, respectively.
"A 0.1 percentage-point upward revision in first-quarter real GDP adds about 0.1 percentage point to the annual growth estimate," Kim Hwa-yong, director of the production, expenditure and income division at the BOK, said at a press conference.
The comment suggests that the central bank's latest 2.6 percent growth forecast for this year, revised up from 2 percent in February, could be nudged closer to 2.7 percent if current conditions persist. The BOK is set to release an update in August.
The economy looked even stronger in nominal terms. Nominal GDP, which measures economic output at current market prices, surged 10.5 percent from the previous quarter, marking the sharpest rise since 1976.
"The stronger nominal GDP growth has been driven not by domestic inflation, but by an improvement in the earnings of Korean exporters," Kim said, adding that it differs from past episodes of cost-driven inflation.
Shortly after the BOK's announcement, JPMorgan raised its full-year growth forecast for Korea's real GDP to 3.7 percent from 3 percent, citing the stronger-than-expected pace of economic expansion.
The investment bank said while the direction of the expansion was "broadly expected, the magnitude was far stronger than anticipated."
Further data from the central bank showed the country's real gross national income rose 9.2 percent in the first three months on-quarter.
While real GDP measures economic output, real GNI measures the total income earned by a country's residents, and is often viewed as a better gauge of living standards.
The 9.2 percent increase far outpaced real GDP growth, reflecting strong net factor income from abroad amid higher semiconductor prices.
While the per capita GNI rose 0.3 percent from a year earlier to $36,963 last year, the pace of the first quarter growth hints the long-sought $40,000 threshold remains within reach sooner than expected.
"The timeline for reaching $40,000 is moving faster than previously expected. If the current growth continues, per capita income could approach that level this year," Kim said.
The won-dollar exchange rate remains the key variable, however, as a weaker won reduces per capita GNI when converted into dollar terms.
"The attainment of the milestone would hinge on corporate earnings and the won's valuation against the dollar," Kim said.
silverstar@heraldcorp.com
