S. Korean economy continues to improve on strong AI-led exports, investment

Seoul, September 7 - South Korea's economy has continued to show improvement, according to a state-run think tank. The Korea Development Institute (KDI) attributes this growth to strong exports and AI-related investments both domestically and internationally. Despite some uncertainties, such as Middle East developments and U.S. tariff policies, the economy remains robust.

The KDI's monthly economic assessment highlights the positive impact of AI infrastructure investments. Industrial output rose by 3.1 percent in July compared to the previous month, although this was a slower pace than the 4.4 percent increase in June. However, industrial output still surpassed the average of 2.9 percent seen in the second quarter, indicating a consistent upward trend.

Exports have also seen impressive growth, with the value increasing by 68.7 percent in August compared to the same period last year. This surge is primarily driven by a more than 200 percent rise in semiconductor shipments, which have benefited from rising chip prices. Investment in facilities related to semiconductors and equipment has also seen a significant boost, rising 24.9 percent in July.

Despite these positive indicators, the think tank notes that private consumption remains modest. This is largely due to limited improvements in household purchasing power, which has prevented the economic gains from fully trickling down to consumers. Retail sales, in particular, experienced a contraction in July, falling by 0.8 percent after growing by 3.9 percent in June, mainly due to a sharp decline in sales of durable goods.