In recent months, South Korea’s semiconductor exports have faced a slowdown, raising global concerns about a potential decline in demand for artificial intelligence (AI) technologies. The country’s economic growth for the last quarter was only 1.5%, falling short of analysts’ expectations and reflecting weakened export momentum, escalating geopolitical tensions, and uncertainties surrounding the U.S. presidential election that could impact trade-reliant nations.

The Bank of Korea reported that the Gross Domestic Product (GDP) for the third quarter grew just 0.1% compared to the previous quarter, which is lower than the 0.4% growth predicted by economic experts. Year-over-year, the growth was also at 1.5%, beneath analysts’ initial estimates of 2%.

Shin Seung-cheol, head of the Bank of Korea’s research department, indicated in a briefing that a revision of the economic growth forecast might take place during the central bank’s decision-making meeting next month. Initially, the Bank projected a 2.4% GDP growth for this year back in August.

The noted slowdown in semiconductor exports has sparked worries about waning global AI demand. Furthermore, the sluggish economic growth could prompt the central bank to consider accelerating interest rate cuts. This month, the Bank of Korea had already reduced the seven-day repurchase rate by 25 basis points to 3.25%, marking the first interest rate cut since mid-2020.

Lee Seung-sik, a researcher at the Korea Economic Research Institute, remarked, “It’s a difficult situation. However, if economic conditions worsen more than expected, the Bank of Korea may have to cut rates further.” He added, “No one anticipated that export momentum would soften so soon. With rising uncertainties in the U.S. economy and increased risks from Middle Eastern conflicts, achieving economic forecasts might prove challenging.”

On a brighter note, consumer spending has shown resilience, with a 0.5% increase compared to the previous quarter, while equipment investment surged by 6.9%, reflecting higher expenditures on semiconductor manufacturing equipment.