South Korea’s economy grew by 0.6% in the second quarter, beating expectations due to high demand for AI-related semiconductor chips. The strong performance now places focus on the Bank of Korea, as policymakers weigh further interest rate hikes to manage inflation despite rising energy import costs. The primary driver of this economic uptick has been heavy demand for advanced chips designed for artificial intelligence applications, with manufacturers seeing a sharp increase in export volumes. Many analysts suggest policymakers may consider additional interest rate hikes before October. Since late February, regional instability related to the conflict in Iran has caused significant volatility in global energy prices, and as an economy heavily dependent on energy imports, South Korea is experiencing higher costs that partially offset export gains. The International Monetary Fund and the Bank of Korea have both recently adjusted their growth projections to reflect a more optimistic outlook.