Why is Korea lagging behind Taiwan?

Korea and Taiwan both recorded strong export-led growth in the third quarter, but Taiwan significantly outperformed, with GDP expanding by 14.4% y/y against 3.4% in Korea. This largely reflects Taiwan’s greater export dependence and the fact that its export boom has been driven by higher volumes, whereas Korea’s has mainly reflected higher prices. We expect Korean export volumes and investment to pick up as firms expand capacity to meet strong AI-related demand. But sluggish household spending is likely to remain a drag, meaning growth will fall well short of Taiwan’s over the coming quarters.