South Korea upgrades economy to 'solid recovery' as exports surge

August exports rose 68.7% year-over-year led by semiconductors, computers and cosmetics

South Korea’s Ministry of Finance and Economy said Friday that the economy is in a “solid recovery,” upgrading its language from August, when it characterized the recovery as “strengthening.” The change reflects signs that the economy “has moved up to a new level, driven by rapid and strong growth momentum,” according to Lim Hong-gi, director of the ministry’s Economic Analysis Division.

South Korean exports jumped 68.7% in August from a year earlier, led by strong shipments of semiconductors, computers and cosmetics, the ministry’s monthly Green Book assessment said. Average daily exports, adjusted for the number of working days, rose 72.5%. The export boom showed signs of accelerating this month, with preliminary Customs Service data released Friday showing shipments during the first 10 days of September soaring 82.6% year over year.

Lim noted that the economy recorded virtually no quarter-over-quarter growth from the second quarter of 2024 through the first quarter of 2025, but has recovered rapidly since. It is now settling at that higher level, he said, with the solid growth trajectory likely to continue into next year unless external conditions take a turn for the worse.

The ministry raised its level of caution over external conditions, saying uncertainty related to the Middle East war and U.S. tariff measures had “somewhat increased.”

Lim said government price caps on petroleum products should limit the immediate impact of higher crude prices and keep inflation in check. “Although international oil prices have surpassed $100, the initial impact will not be significant because we have capped petroleum product prices,” he said. “Barring any major unforeseen developments, we expect to meet our annual consumer inflation forecast of 2.7%.”

The ministry also cited difficult employment conditions among vulnerable groups and struggling industries, although the number of employed people increased by 184,000 year over year in August.

Recent consumption indicators were mixed. Retail sales fell 2.4% in July from the previous month and 0.8% from a year earlier, while facility investment rose 7.5% month over month and 24.9% annually.

Lim acknowledged that domestic demand was recovering more slowly than exports and investment but said it had gradually improved since bottoming out early last year. “The pace of the recovery is not satisfactory, but it is getting better little by little,” he said.