By Kwanwoo Jun


South Korea's economy rebounded at a stronger-than-expected pace in the first quarter on robust semiconductor exports, signaling that the trade-dependent country's artificial intelligence-driven buffer remains intact even as it faces new risks from the war in the Middle East.

Gross domestic product expanded 1.7% in the January-March period from the previous quarter, preliminary data from the Bank of Korea showed Thursday, reversing a revised 0.2% contraction in the final quarter of 2025.

On a year-over-year basis, the economy grew 3.6% in the first quarter, compared with a revised 1.6% expansion in the previous quarter.

The latest figures -- the strongest quarter-on-quarter growth in more than five years and year-on-year growth in more than four years -- exceeded market expectations. Economists surveyed by The Wall Street Journal had forecast growth of 0.9% on quarter and 2.7% on year.

Exports remained strong, led by robust demand for memory chips and information-technology products. Government spending and private consumption continued to support growth, amid a recovery in construction and facility investments.

Despite the strong start to the year, South Korea's outlook is increasingly marred by the fallout from the Middle East conflict. The country is heavily reliant on the region for energy imports and other key inputs, leaving it vulnerable to oil and raw-material supply disruptions.

Bank of Korea Gov. Shin Hyun-Song, who took office earlier this week, said that growth is likely to be weaker than previously projected, while inflation could pick up in the coming months, driven by higher oil prices and a weaker won. That largely echoed comments by his predecessor, indicating that the BOK is keeping a vigilant watch over the war's impact on South Korea's economy.

The central bank said ahead its May outlook revision that it expects growth to fall short of its February forecast of 2.0% this year, while inflation could exceed its earlier estimate of 2.2%.

It added that the trajectory for both growth and inflation will depend largely on developments in the Middle East.


Write to Kwanwoo Jun at kwanwoo.jun@wsj.com


(END) Dow Jones Newswires

04-22-26 1924ET