KDI "Solid Growth Driven by AI Investment... Economic Recovery, Including Consumption, Remains Slow"

Yonhap News Agency

The Korea Development Institute (KDI), a state-run think tank, said the Korean economy has recently continued to post solid growth, driven mainly by investment in AI infrastructure, but the benefits of the economic recovery, including improved consumption, are spreading slowly across households.

In its November Economic Trends report released on the 9th, the KDI said, "Driven by strong external demand, semiconductor production and investment have continued to post high growth."

In September, the KDI described the trend as "maintaining improvement" in sectors closely tied to AI-related investment. It kept similar wording in October, but changed its description to "solid growth" this month.

The KDI said, "Exports of electronic equipment, non-ferrous metals and steel products, which are closely linked to the construction of AI data centers, increased significantly, while investment in machinery and equipment also recorded broadly solid growth." It added, "Thanks to strong exports and investment in facilities, real gross domestic product grew by a strong 3.4% in the third quarter."

However, the KDI reiterated its assessment that the benefits of the economic recovery are spreading slowly across households. It said that while the effects of income gains from the semiconductor boom have yet to clearly reach households broadly, the burden on households from high oil prices has also persisted, resulting in relatively low growth in private consumption in the third quarter.

The retail sales index fell from -0.1% to -0.4% in September, led by a decline in durable goods (-5.2% to -10.8%). Private consumption in the national accounts also slowed, with its growth rate narrowing from 2.4% to 1.1% in the third quarter, indicating a broader slowdown in the improvement in consumption.

Regarding external factors, the KDI noted that "external risks remain, as conflicts in the Middle East continue and policy uncertainty in major economies increases." The recent oil price outlook was revised upward, reflecting the possibility of continued transport disruptions in the Middle East and a decline in global inventories.

This content was produced with the assistance of AI translation services.