South Korea's economy grew faster than expected in the third quarter, as the artificial-intelligence boom continued to drive strong semiconductor exports, offsetting weakness elsewhere.
Gross domestic product expanded 1.0% in July-September from the previous quarter, following 0.6% growth in April-June, preliminary Bank of Korea data showed Tuesday.
The economy grew 3.4% from a year earlier, compared with 3.7% in the second quarter, the data showed.
Third-quarter GDP growth beat market expectations. The median forecast of 19 economists surveyed by The Wall Street Journal was for growth of 0.7% from the previous quarter and 3.3% from a year earlier.
Exports remained a key driver of overall growth, as the global investment in AI infrastructure sustained demand for semiconductors. South Korea is home to memory-chip makers Samsung Electronics and SK Hynix.
Facilities investment, including spending on chip-making equipment and other machinery, increased sharply from the previous quarter, while private consumption contracted.
Construction investment returned to growth in the third quarter, while government spending increased at a faster pace from the previous quarter.
Policymakers and most analysts expect strong semiconductor demand to sustain South Korea's economic expansion despite the uneven performance across the economy.
The BOK said last week that growth this year would likely significantly exceed its August forecast of 3.3%. The central bank held its policy rate steady after two consecutive increases but signaled further policy tightening as strong growth and above-target inflation persist.
Nomura recently raised its 2026 growth forecast to 3.6% from 3.2%, citing strong semiconductor exports and AI-related investment.
Citigroup expects the chip-led expansion to keep annual growth at or above 3% over the next three years. It forecasts growth of 3.7% in 2026, 3.1% in 2027 and 3.0% in 2028.
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