South Korea's Q2 real GDP growth slowed sequentially, but exports continued to support positive momentum

Overview

This report assesses South Korea's real GDP performance in the second quarter of 2026. Goldman Sachs notes that South Korea's Q2 real GDP grew 0.6% qoq sa, slowing significantly from 1.8% in the previous quarter but in line with Goldman's above-consensus forecast; yoy growth edged down from 3.8% to 3.7%. The slowdown was broad-based, with contributions from domestic demand, investment, net exports, and manufacturing all declining from the previous quarter, although exports continued to grow and the services contribution continued to improve.

Core views

The core view is that South Korea's economy experienced a broad slowdown in Q2, but not a loss of momentum. The domestic demand contribution declined, with private consumption slowing from 0.6% in the previous quarter to 0.4% and fixed investment declining from 2.9% to 0.8%; the net exports contribution also fell from +1.1 percentage points to +0.3 percentage points. However, exports of goods and services still grew 1.4% sequentially, with technology and machinery exports supporting positive momentum, while intellectual property product investment, driven by semiconductor-related R&D activity, reached its strongest momentum since Q1 2012.

Analysis framework

The report uses a national accounts decomposition framework to analyze South Korea's Q2 real GDP along two dimensions: the expenditure approach and sector contributions. On the expenditure side, it examines private consumption, government consumption, fixed investment, inventories, exports, and imports; on the sector side, it compares the contributions of manufacturing, electronics, and services to overall growth, and supplements the analysis with changes in real GDI and the terms of trade.

Methodology notes

• Macroeconomic analysisGDP expenditure decomposition

  Decomposes sequential real GDP growth into contributions from domestic demand, net exports, consumption, investment, and inventories.

  This framework identifies whether slowing growth is driven by domestic demand, external demand, or inventory changes, and compares the marginal contribution of each component to overall growth.

• Macroeconomic analysisSector contribution analysis

  Decomposes GDP growth contributions by manufacturing, electronics, and services.

  This framework assesses whether growth momentum is concentrated in exports and the technology supply chain or is spreading to services.

• Macroeconomic analysisReal GDI and terms-of-trade analysis

  Compares real Gross Domestic Income growth with real GDP growth.

  Real GDI grew 3.6% qoq sa in Q2 and remained faster than GDP, indicating that improving terms of trade continued to support income performance, although growth slowed markedly from 8.7% in the previous quarter.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• South Korean macroeconomy

  Direct research subject

  Strengths

  GDP growth was in line with Goldman's forecast and above consensus; exports, services, and real GDI continued to make positive contributions.

  Weaknesses

  Sequential growth declined from 1.8% to 0.6%, while contributions from domestic demand, investment, net exports, and manufacturing all fell.

  Comparison

  Growth slowed markedly compared with the previous quarter; compared with the Bloomberg consensus, the Q2 result was stronger.

  Risks

  If exports decline, consumption support fades, or investment continues to weaken, subsequent growth could slow further.

• South Korean technology and semiconductor-related supply chain

  Growth support factor

  Strengths

  Technology and machinery exports supported positive export growth, while semiconductor-related R&D accelerated intellectual property product investment.

  Weaknesses

  The electronics sector was estimated to contribute less than 30% of overall sequential growth, and manufacturing's overall contribution declined from the previous quarter.

  Comparison

  Intellectual property product investment reached its strongest momentum since Q1 2012, but manufacturing's contribution was weaker than in the previous quarter.

  Risks

  Volatility in global technology demand, weaker export orders, or a cooling semiconductor cycle could weaken this support.

Key data

• Q2 real GDP+0.6% qoq sa; +3.7% yoyThe previous quarter recorded +1.8% qoq sa and +3.8% yoy; the Bloomberg consensus was +0.4% qoq sa, while Goldman Sachs forecast +0.6% qoq sa.
• Domestic demand contribution+0.3 percentage pointsThe previous quarter recorded +0.7 percentage points, as both private consumption and investment slowed.
• Net exports contribution+0.3 percentage pointsThe previous quarter recorded +1.1 percentage points; export growth slowed but remained positive.
• Exports of goods and services+1.4% qoq saThe previous quarter recorded +5.9%; the BOK said technology and machinery exports supported positive momentum.
• Fixed investment+0.8%The previous quarter recorded +2.9%; construction investment was -0.2% and equipment investment was +0.2%.
• Intellectual property product investment+3.3%Driven by semiconductor-related R&D activity and financial security software purchases, it reached its strongest momentum since Q1 2012.
• Manufacturing contribution+0.3 percentage pointsThe previous quarter recorded +1.1 percentage points; the electronics sector's contribution was estimated at less than 30% of overall sequential growth.
• Services contribution+0.6 percentage pointsThe previous quarter recorded +0.4 percentage points, marking a second consecutive quarterly increase.
• Real GDI+3.6% qoq saOn a non-annualized basis, it remained faster than GDP due to improving terms of trade, but was below +8.7% in the previous quarter.

Impact & implications

For investment and macroeconomic assessment, the implication is that South Korea's Q2 growth momentum cooled at the margin, but the above-consensus result and continued positive export growth reduce concerns about a sudden economic weakening. Semiconductor-related R&D and technology and machinery exports remain key supports; at the same time, slower private consumption, construction investment, equipment investment, and manufacturing contributions indicate that the recovery is uneven.

Risks

• Continued slowing in private consumption and fixed investment could weigh on subsequent domestic demand.
• The net exports contribution declined significantly from the previous quarter, and export support could weaken if external demand cools.
• The manufacturing contribution fell from a high level, while the electronics sector contributed less than 30% of overall growth, indicating that growth support is not broad-based.
• Inventories remained a negative contributor. Although the drag narrowed, this still reflects some pressure from demand or production adjustments.
• Although real GDI growth remained above GDP growth, it slowed sharply from the previous quarter, suggesting that income support from improving terms of trade may weaken at the margin.

What to watch

• Whether exports, particularly technology and machinery exports, can sustain positive growth in subsequent quarters.
• Whether semiconductor-related R&D activity continues to support intellectual property product investment.
• Whether private consumption remains resilient following support from government measures, rising equity markets, and tourism-related services consumption.
• Whether construction investment and equipment investment recover from the Q2 slowdown.
• Whether the services contribution continues to rise and offset the manufacturing slowdown.
• The BOK's subsequent assessment of growth, consumption, and export momentum.