South Korea's export sector is demonstrating robust growth, with DBS Group Research’s Ma Tieying projecting June exports to remain very strong, showing year-on-year growth around 50–60% for the fourth consecutive month. Preliminary data for the first 20 days of June indicated a 60.4% year-on-year increase in exports. This export strength is attributed to AI-driven demand and higher memory chip prices, which are helping to offset increased energy import costs. As a result, the trade surplus is expected to widen above USD30bn, up from USD27bn in the previous month [1].
On the inflation front, both headline and core Consumer Price Index (CPI) are forecast to rise further. Headline CPI is expected to accelerate to 3.4% year-on-year in June, up from 3.1% in the previous month, marking the second consecutive month above the 3% threshold [1].
Given these developments, the Bank of Korea is projected to deliver two 25 basis point rate hikes by the fourth quarter. The strong export performance and persistent upward pressure on inflation are seen as key drivers behind this anticipated monetary tightening [1].
Market participants are closely watching the upcoming June trade and inflation data, as these will be critical in shaping expectations for the Bank of Korea's policy path [1].
CONCLUSION
South Korea's strong export growth and rising inflation are reinforcing expectations for monetary tightening by the Bank of Korea. With two rate hikes projected by the fourth quarter, markets are likely to remain attentive to upcoming trade and inflation data for further direction.