Investing.com - The South Korean economy is on an upward trajectory, bolstered by a resurgence in manufacturing. The nation's gross domestic product (GDP) surged ahead by 0.6% during the second quarter of this year, according to recent data released by the Bank of Korea. This surpasses previous projections that predicted a modest expansion of only 0.5%.
This marks the second consecutive quarter where economic growth has been recorded since last year's downturn at year-end. As part of its strategy to control inflation while keeping economic activity robust, the Bank of Korea has maintained stable key interest rates with a preference for tighter monetary policy.
Experts believe that despite recession fears lingering in some quarters, manufacturing will persistently bounce back and regain normalcy as pandemic-related impacts gradually fade away. Chang Jaechul from KB Kookmin Bank expressed confidence about this recovery trend.
In addition to giving room for maintaining stringent policies, this latest GDP increase also puts South Korea on par with expectations surrounding US Federal Reserve's rate hikes set to take effect soon.
Having faced an export slowdown since last year, South Korea finally reported its first trade surplus after over a year-long dry spell last month. Moreover, consumer optimism seems to be returning as demonstrated by the consumer confidence index crossing into positive territory.
However, doubts regarding sustainable momentum still exist given early indicators pointing towards declining exports for July - their fastest drop rate since March - and unresolved questions about potential upswings in key sectors like semiconductors and demand recovery from China—the country’s largest trade partner.
Despite net exports significantly contributing towards Q2 growth due more so to weaker imports than stronger exports coupled with reduced government spending and slight decrease in private consumption; experts are optimistic that recovering electronics and tech sector demand will continue propelling export improvements—thus aiding overall economic performance.