South Korea's exports maintained strong momentum in April, with robust semiconductor demand continuing to fuel growth despite rising risks from energy price increases linked to instability in Iran. The trade ministry reported on Friday that exports, adjusted for working-day differences, increased by 48% compared to the same period last year. Unadjusted export figures also rose by 48%, slightly down from the revised 49.2% growth recorded in March. Imports during the same period grew by 16.7%, resulting in a trade surplus of $23.8 billion.
The semiconductor industry remains the central driver of South Korea’s trade expansion. Industry leaders such as Samsung Electronics and SK Hynix have benefited from premium pricing and surging orders for high-end products like high-bandwidth memory (HBM), helping push the semiconductor export price index to its fastest growth rate in decades. With orders from major AI accelerator producers scheduled through 2025 and beyond, this technology-driven demand has effectively offset export slowdowns in traditional manufacturing sectors such as automobiles and steel.
Data indicate that despite heightened external risks, South Korea’s export engine has shown resilience. Rising oil prices due to conflict in Iran have not only increased import costs but also intensified inflationary pressures for the energy-dependent Korean economy. For policymakers, the divergence between strong exports and rising cost pressures complicates the economic outlook. Higher oil prices and a weaker Korean won are expected to fuel inflation and restrain growth—a challenge already highlighted by the new Bank of Korea Governor, Shin Hyun-song.
In the first quarter, South Korea’s gross domestic product grew by 1.7%, the fastest pace in over five years, reversing an anticipated contraction by the end of 2025. However, April’s strong export performance masks underlying vulnerabilities. Private consumption saw only modest growth in the first three months of the year, and rising energy costs linked to the Iran conflict, combined with a weaker currency, have further strained households and businesses.
Policymakers now face a more complex trade-off: while external demand for semiconductors remains robust, domestic confidence is weakening. In addition, import prices surged significantly in March, underscoring how quickly external shocks can transmit into the domestic economy. This trend may lead the central bank to proceed cautiously when assessing whether inflationary effects are temporary.
Amid concerns over energy supply disruptions and a weakening economic outlook, South Korea’s consumer sentiment fell sharply in April, dropping into pessimistic territory for the first time in a year. Inflation expectations also climbed to one of the highest levels in two years, highlighting growing public anxiety over price increases even as domestic demand remains sluggish.
Former Bank of Korea Governor Lee Chang-yong noted that the central bank tends to look past short-term shocks, but may respond if price pressures become persistent.
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