Seoul: The South Korean economy remains on the recovery track as gains from the booming chip industry offset the slowdown in the overall manufacturing sector, a state-run think tank said Wednesday.

According to Yonhap News Agency, Korea's economy remained on a modest recovery path, supported by robust semiconductor exports and services activity, while manufacturing production softened, as noted in the monthly economic assessment by the Korea Development Institute (KDI). The KDI highlighted that exports by Asia's No. 4 economy continued to expand strongly amid robust artificial intelligence (AI)-related demand.

South Korea's monthly exports hit a fresh record high by surpassing the US$100 billion mark for the first time in June, surging 70.9 percent on-year to $102.25 billion. Although growth in semiconductor export volumes moderated, exports remained robust in value terms, supported by continued price increases. Exports of semiconductors nearly tripled to reach $44.82 billion, with monthly exports surpassing $40 billion for the first time on the back of surging demand for memory chips.

The KDI, however, noted manufacturing production edged down as the earlier rapid gains in semiconductors moderated and other segments remained subdued. Touching on external risks, the think tank mentioned uncertainties have eased since mid-June following talks on ending the U.S.-Iran war, although uncertainties remain over whether a final agreement will be reached.

The KDI added high oil prices and the weaker Korean won against the greenback may continue to exert upward pressure on prices, raising the risk of further policy rate hikes that can weigh on the recovery in consumption. South Korea's consumer prices increased 3.2 percent in June from a year earlier, marking the sharpest increase since December 2023, when the figure was at the same level.