The semiconductor boom driving South Korea's economy is gradually spreading to manufacturing sectors such as chemicals and transportation equipment, as well as to retail and service industries. There are growing expectations that the profits accumulated by companies will support domestic recovery through wages, dividends, and taxes flowing to households and the government.
According to the Bank of Korea on September 8, the real Gross National Income (GNI) increased by 3.1% in the second quarter compared to the previous quarter, significantly outpacing the real Gross Domestic Product (GDP) growth rate. This improvement was attributed to a rise in export prices relative to import prices, enhancing trade conditions.
As income has increased, savings have also risen, even as consumption has not kept pace. The total savings rate climbed to 45.6%, the highest level recorded since statistics began in 1970. This indicates that the increase in income, primarily among businesses, has not yet fully translated into household consumption, suggesting potential for future spending.
Kim Hwa-yong, head of the Bank of Korea's National Income Division, stated, "The increase in the total savings rate could influence future consumption, private spending, and investment. While income has risen, consumption has not increased correspondingly, leaving room for future spending."
There are expectations that the transfer of corporate profits to households and the government will accelerate. As companies distribute earnings through bonuses and dividends, household income will rise, and government revenue from corporate taxes, income taxes, and dividend taxes will also increase. This could support private consumption and domestic recovery.
Kim added, "The increase in total operating surplus due to strong corporate performance will manifest as increased household income through bonuses and dividends, while government income from corporate taxes, income taxes, and dividend taxes will also rise, leading to domestic growth over time. He further noted, "Starting in the second half of this year, the distribution of corporate income to the government and households will gradually become visible, particularly with Samsung Electronics' cash dividends and related taxes."
There are indications that the positive performance driven by semiconductors is already spreading to other sectors. Kim stated, "The operating profit of the semiconductor manufacturing industry has significantly increased, and improvements in performance are gradually being observed in other sectors, including chemicals, transportation equipment manufacturing, and retail services. The petroleum refining industry has seen improvements due to better refining margins, while the chemical manufacturing sector has benefited from increased exports of pharmaceuticals and cosmetics. The machinery and equipment manufacturing sector is experiencing growth due to expanded semiconductor facility investments, and the shipbuilding industry is benefiting from increased exports of high-value ships."
If the economic recovery continues into the second half of the year, the Bank of Korea believes that achieving the annual growth rate forecast is possible. Mathematically, if the growth rate in the second half averages between 0.2% and 0.3% compared to the previous quarter, an annual growth rate of 3.3% could be achieved.
The outlook for the semiconductor industry remains positive. The Bank of Korea anticipates that demand for semiconductors will exceed supply for the time being, driven by ongoing U.S. investments in artificial intelligence (AI). Even if the rise in semiconductor prices slows, there is a likelihood that the increase in volume will continue. In fact, the value-added growth rate in the computer, electronics, and optical equipment manufacturing sector has recorded a high level in the low 20% range.
As the income growth from strong semiconductor exports continues, the possibility of achieving a per capita GNI of $40,000 this year has increased. Last year, South Korea's nominal per capita GNI was $36,855, remaining in the $36,000 range for three consecutive years. With Taiwan surpassing $40,000 for the first time last year and Japan recording around $38,000, South Korea is also likely to exceed the $40,000 mark this year.
Kim stated, "If there are no unexpected shocks in the remaining months of the year and the annual nominal GNI growth rate maintains its current level while exchange rates stabilize, the likelihood of per capita GNI exceeding $40,000 in U.S. dollar terms is very high."
* This article has been translated by AI.
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