South Korea's exports in September set a record! A year-on-year surge of 105%, and the chip boom continues to gain strength

The Zhitong Finance App learned that South Korea's exports continued to grow rapidly in September, and global demand for artificial intelligence continued to drive semiconductor shipments, strengthening the market's expectations that this trade-dependent economy can withstand higher interest rates. According to data released by the Korea Customs Service on Thursday, exports increased 104.9% year over year after adjusting for differences in working days. The export volume reached US$120.9 billion, a record high. Previously, shipments in the first 20 days of this month had already risen to a record high for the same period.

According to the Customs Service, in the first nine months of 2026, South Korea's exports also reached a record high of 814.5 billion US dollars, breaking through 800 billion US dollars for the first time. Unadjusted exports increased by 83.5%, and the increase was 68.7% after the August correction. Imports grew 26%, creating a trade surplus of nearly $50 billion.

Semiconductors are still the engine of prosperity, with chip exports surging 263% year over year to a record $60.3 billion. Computer shipments soared 435%, and petroleum products increased 72%. Automobile exports fell 5%.

Exports achieved strong growth in September this year, despite a reduction in working days due to the Korean Mid-Autumn Festival holiday (September 24-26). Last year's Mid-Autumn Festival holiday was in October, causing calendar effects that may distort year-on-year comparisons.

Jiuk Choi, Asia Pacific macro strategist at State Street Bank, said, “Undoubtedly, exports and trade balances in September were far higher than market consensus and our previous estimates.” He expects export growth to slow from the fourth quarter due to base effect. He added that the expansion of global investment related to artificial intelligence and the rise in the price of high-bandwidth memory chips will still support exports.

According to the data, South Korea's trade momentum remained strong until the end of the third quarter, supporting the Bank of Korea's view that the economy can withstand higher borrowing costs, and reinforcing the reasons for further tightening monetary policy.

The Bank of Korea raised the benchmark interest rate by 25 basis points to 3% in August, raising interest rates for the second time in a row. Previously, stronger than expected growth and continued underlying inflation prompted policymakers to act early.

The Bank of Korea also raised its 2026 growth forecast from 2.6% to 3.3%, citing strong exports and investment driven by global AI construction. The median interest rate forecast for the six-month period is 3.25%, which suggests that interest rates will be raised by 25 basis points, but Governor Shin Hyun-song said that this figure points to a gradual tightening pace after continuous interest rate hikes.

Choi expects growth in the third quarter to be roughly in line with the Bank of Korea's 0.3% month-on-month growth forecast, and believes that as the AI boom accelerates, the central bank will slightly raise growth and core inflation forecasts in November.

J.P. Morgan believes that if chip-driven growth generates stronger inflation without causing significant financial market pressure, interest rates may need to rise further. The Wall Street bank anticipates that the Bank of Korea will raise interest rates in November, February, and May next year, raising the benchmark interest rate to 3.75%.

The chip boom is also changing the government's fiscal position. South Korea expects national tax revenue to reach a record 478.6 trillion won ($353 billion) this year, up 28% from 2025, boosted by semiconductor profits, special dividends from chipmakers, stock market boom, and consumer recovery.

Inflation is another key consideration for the Bank of Korea. Overall consumer price increases accelerated to 3.1% in August, while core inflation, excluding volatile food and energy prices, rose to 3.4%, indicating that underlying price pressure is still strong.

Continued strong exports are also improving South Korea's external position and may support a further appreciation of the won, help curb imported inflation, and give policymakers some flexibility in the timing of the next rate hike.

By destination, exports to China increased by 123%, while exports to the US surged 137%. Exports to India and the EU increased by 50% and 21%, respectively.