South Korea's export sector continued its impressive performance in August, fueled by surging demand for artificial intelligence-related chips, which is also providing a substantial boost to the broader economy. This momentum is expected to support the central bank's hawkish policy stance following two consecutive interest rate hikes.

According to customs data released on Tuesday, adjusted for working-day differences, exports in August jumped 72.5% year-on-year, while imports grew 22.5%, resulting in a trade surplus of $34.7 billion. On an unadjusted basis, exports rose 68.7%, following a revised growth rate of 63% in July.

Semiconductors remain the primary engine driving South Korea's export growth. The latest figures indicate that external demand continues to show resilience despite headwinds from elevated energy prices and geopolitical tensions, which have pressured other industrial sectors. This strength underpinned the central bank's decision to raise its policy rate by 25 basis points for a second consecutive meeting last week.

The Bank of Korea has also upwardly revised its economic growth forecast for 2026, lifting it to 3.3% from a previous estimate of 2.6%. Meanwhile, headline inflation in July slowed more than anticipated to 2.8%, but core inflation, which excludes volatile food and energy prices, accelerated to 2.6%, signaling that underlying price pressures remain stubborn.

The central bank has left its overall inflation projection unchanged, expecting consumer prices to advance 2.7% this year and 2.3% by 2027. Core inflation forecasts for both this year and next have been slightly raised to 2.5%.