SEOUL, July 24, 2025 (BSS/AFP) - South Korea's economy grew 0.5 percent in the second quarter, the country's central bank said Thursday, as strong demand for semiconductors propelled exports to its biggest gain in nearly five years.

"Real gross domestic product (GDP) grew 0.5 percent compared to the same period last year," the Bank of Korea said, adding that output expanded by 0.6 percent from the previous quarter.

The quarterly gain exceeded the bank's May projection of 0.5 percent, driven by stronger private consumption and a 4.2 percent increase in exports.

But the central bank warned that US tariffs posed risks to the economy, with Seoul having failed so far to reach a deal with Donald Trump's administration to bring down the threatened 25 percent levy on South Korean goods.

"Factors like US tariffs are significant uncertainties that remain regarding the country's future growth trajectory," Bank of Korea official Lee Dong-won told a press briefing on Thursday.

"As for the second and third quarters of this year, tariffs do not appear to have had a major impact yet. This is mainly because reciprocal tariff measures were temporarily suspended, and Korean companies responded swiftly," he added.

Experts also put the rebound down to easing political stability after president Yoon Suk Yeol's impeachment over his declaration of martial law was complete and a new president elected.

The country's economy has "bottomed out with a rebound in GDP in the second quarter after political instability and weak confidence drove a contraction early this year," said Hyosung Kwon an economist at Bloomberg.

"Even so, an output gap deep in negative territory means there's still slack between demand and supply," said Kwon, adding that the recovery was "fragile".

Besides the threatened broader 25 percent US tariff if a deal is not reached by August 1, South Korea has already been hit with similar levies on steel and car exports to the United States.

Trade minister Yeo Han-koo, currently in Washington, told reporters on Tuesday that the country faces a "grave situation" and that they will "do their best in the negotiations".

But the finance ministry said Thursday morning that their trade talks were cancelled due to US Treasury Secretary Scott Bessent's "urgent schedule".