South Korea’s economy gains momentum as ai investment and exports strengthen

Monday 07 September 2026 - 15:44

By: Azzat Manal

South Korea’s economy gains momentum as ai investment and exports strengthen

South Korea’s economy continued to show signs of improvement, supported by strong exports and growing investment in artificial intelligence infrastructure, according to the Korea Development Institute’s latest economic assessment.

The institute said economic activity was increasingly being driven by industries closely linked to AI-related investment, both domestically and internationally. Despite continued geopolitical uncertainty, particularly amid instability in the Middle East, the country’s manufacturing and technology sectors have maintained a positive trajectory.

Industrial production rose by 3.1% in July compared with the previous month. Although this represented a slowdown from the 4.4% increase recorded in June, the latest figure remained above the second-quarter monthly average of 2.9%, pointing to a gradual strengthening of industrial activity.

Exports also recorded a sharp increase in August, rising 68.7% year on year. Semiconductor shipments were a major contributor to the growth, with chip exports increasing by more than 200% amid higher semiconductor prices and strong global demand.

Investment in facilities followed the same upward trend. Facility investment climbed 24.9% in July, largely reflecting increased spending on semiconductor-related plants and equipment. The figures highlight the central role of the chip industry in South Korea’s economic recovery and its expanding position in the global AI supply chain.

However, domestic consumption remained less dynamic. Retail sales fell 0.8% in July after growing 3.9% in June, mainly due to a significant decline in sales of durable goods.

The Korea Development Institute nevertheless considers the broader economic outlook to be improving, with AI infrastructure, semiconductors and exports emerging as key drivers of growth. At the same time, policymakers continue to face external risks, including uncertainty surrounding US tariff policies and persistent geopolitical tensions in the Middle East.

South Korea’s economic performance will therefore remain closely linked to developments in global technology markets, international trade and the continued expansion of investment in artificial intelligence.