South Korea's economic outlook for the year is bright and shiny. Photo: Tom Coyner

The OECD’s best performer last year continues to outpace the pandemic, with first-quarter growth beating consensus estimates.

South Korea’s economy grew 1.8% in the three months of 2021, year-on-year, the Bank of Korea announced on Tuesday morning. On a quarterly basis, the manufacturing powerhouse’s gross domestic product expanded 1.6% – an increase from its 1.2% expansion in Q4 of 2020.

The figures were better than expected.

Yonhap Infomax, the financial news arm of the semi-official Yonhap News Agency, had anticipated national GDP would grow a modest 1.23%, year-on-year. A Reuters poll had expected an even more modest 1.0% figure for the quarter.

The upbeat data was underwritten by exports and facility investments. On-quarter, those two metrics rose 1.9% and 6.6%, respectively.

The country’s heavy reliance on trade and its broad-based exports portfolio – which comprises semiconductors, displays, electronic devices and appliances, autos, ships and petrochemicals – make South Korea a key bellwether for regional and global economic health. According to the Korean Customs Service, exports soared 45.4% in the first 20 days of April, on-year.

Robust semiconductors sales are leading the export surge. South Korea is the world’s top producer of memory chips and flagships Samsung Electronics and SK hynix are well-positioned amid a global shortage of chips. The two companies are expected to release Q1 earnings reports later this week.

Auto exports were also robust, with Hyundai Motor seeing strong exports of its top-end cars. The automaker reported Q1 operating profits of US$1.47 billion – a 92% surge year-on-year and a 32% acceleration quarter-on-quarter.

For the year, the OECD expects Korea to grow 3%, buoyed by a chip-led export surge, consumer spending bolstered by government handouts. The OECD also cited the positive impact of the investments of the government’s recovery plans the “Korean New Deal” and the “Green New Deal.” Moreover, a tax holiday for SMEs will not expire until September.  

The Bank of Korea is on the same page as the OECD, predicting 3% growth for the year. The country’s finance ministry is betting on 3.2%, while a Reuters poll anticipates 3.4%.

The latter would not simply be an athletic bounce back from the pandemic year, it would also be the country’s strongest annual performance in a decade, Reuters noted.