According to data released by the Organization for Economic Co-operation and Development (OECD) on Sunday, South Korea's real gross domestic product (GDP) grew 1.7 percent in the first three months of this year, ranking second among 35 member countries.
Only Denmark grew faster at 1.9 percent, while the OECD average stood at 0.4 percent.
South Korea's strong performance marked a dramatic reversal from the fourth quarter of last year, when its economy contracted 0.2 percent and ranked near the bottom among OECD member countries.
The rebound has been fueled largely by strong semiconductor exports as global demand for artificial intelligence (AI)-related technology continues to surge, prompting international organizations and investment banks to raise their growth forecasts for South Korea.
Robust exports have also pushed the country's current account surplus to record levels. The cumulative current account surplus reached an all-time high of $102.7 billion in the first four months of this year, more than four times the level recorded a year earlier.
Reflecting this trend, the OECD recently raised its growth forecast for South Korea to 2.6 percent from 1.7 percent, while several global investment banks have become even more optimistic, with some projecting economic growth of around 3 percent this year.
The OECD expects the surplus to expand further, potentially reaching around 10 percent of GDP by 2027 if exports remain strong. South Korea is "projected to have a sharp increase in its external balance, from 6.6 percent of GDP in 2025 to around 10 percent of GDP in 2027, helped by continued strong IT-related exports," it said.
Despite the upbeat outlook, concerns remain over the country's long-term growth potential, as the OECD projects that South Korea's potential growth rate, a measure of how fast the economy can grow without triggering inflation, will fall to 1.52 percent next year and dip below 1.5 percent by late 2027, the lowest level since it began compiling such data.
The contrasting outlook suggests that South Korea's short-term economic strength, powered by a historic chip boom, masks longer-term challenges including an aging population, slowing labor productivity, and weak domestic demand.
The weakening won also adds to worries, as the currency recently fell to around 1,560 against the greenback, its weakest level in more than 17 years, last seen during the global financial crisis in March 2009 when it hit almost 1,600.
Consumer prices also rose 3.1 percent last month from a year earlier, surpassing the 3 percent mark for the first time in more than two years.
Financial officials said the economy remains fundamentally sound, pointing to record current account surpluses and strong exports, though they admitted that rising import costs and a weaker currency could weigh on households and businesses in the months ahead.
Copyright ⓒ Aju Press All rights reserved.