(Bloomberg) -- South Korea’s economy barely managed to eke out growth last quarter following an earlier contraction, underscoring the risks from a softening export rally, broadening geopolitical tensions and a US presidential race that may impact trade-reliant nations.

Gross domestic product expanded 0.1% in the three months through September from the previous quarter, the Bank of Korea said Thursday. That figure missed economists’ forecast of a 0.4% expansion by a wide margin and came after a 0.2% contraction in the second quarter.

From a year earlier, the economy expanded 1.5%, also slower than than analysts’ forecast of 2%. Uncertainties have grown over economic growth for this year and next and they will be reflected in forecasts to be renewed in November when the BOK sets its benchmark interest decision, the bank said. The BOK began its policy pivot earlier this month with a rate cut.

South Korea is among the world’s most robust exporters, with its technology industry driving earnings from abroad. But the rally in memory-chip exports has shown signs of slowing in recent months, raising questions over the intensity of global demand related to artificial intelligence development.

Exports in real terms fell due to a moderation in technology exports and dullness in other products, the BOK said. A decline in the shipments of automobiles and chemical products in particular led the export decline by 0.4% in the third quarter from the previous three months while imports increased by 1.5%, the BOK said.

Private consumption fared better, rising 0.5%, while facility investment expanded 6.9% as spending on equipment such as chip-making machines increased, it said. 

“Our economy grew modestly as domestic demand picked up as expected, but exports grew more slowly than expected,” the BOK said.

The importance of shoring up domestic consumption has emerged into the heart of policy debate as trade data indicate technology exports are beginning to peak out. 

The BOK defended its timing for a policy pivot when it cut its benchmark interest rate this month, saying easing earlier would have added fuel to an overheated property market in Seoul and threatened financial stability. Governor Rhee Chang-yong added the central bank considered the country’s economic growth potential and slower inflation in reaching the decision to lower the rate by a quarter-percentage point to 3.25%.

When the BOK meets next month, most economists expect a hold and will likely focus on any changes in the growth forecast to guess the timing for the next rate cut. A Bloomberg survey last week indicated economists think the monetary policy board will conduct two cuts in the first half of next year and another one in the final quarter.

“While we believe growth may not be the top priority on the BOK’s agenda compared to other concerns, the MPB will certainly monitor Q3 GDP data and AI-driven demand for chips closely when assessing the pace of monetary easing,” Pantheon Macroeconomics analyst Kelvin Lam said before Thursday’s release.

Expectations of an almost year-round easing next year reflects a softening outlook for exports and economic growth.

Most South Korean businesses are concerned that trade barriers will rise in 2025 and tariffs weigh on global commerce regardless of whether Donald Trump or Kamala Harris takes power in November’s US presidential election. North Korea’s growing involvement in Russia’s war on Ukraine is also compounding geopolitical risks that weigh on global commerce.

South Korea’s trade ministry said Tuesday export growth may slow down in the October-December period compared with the previous three quarters, even though it will still stay positive.

The softening is likely due to a delay in the recovery of global manufacturing, said Hanwha Investment & Securities economist Lim Hye-youn. “US manufacturers are taking into account a consumption slowdown while it’ll take time to confirm the effectiveness of China’s stimulus,” he said.

China remains the biggest trading partner for South Korea even as Seoul’s economic ties with Washington strengthens under a security alliance that President Yoon Suk Yeol has fortified with the Biden administration.

The push back toward the US in trade relations coincides with rising competition from Chinese companies in everything from automobiles to semiconductors. South Korea last year recorded its first trade deficit with China in about three decades.

America’s leading position in artificial intelligence development has also given South Korean companies like Samsung Electronics Co. and SK Hynix Inc. an incentive to bolster their operations and investment in the US.

The government is separately proceeding with 26 trillion won ($18.9 billion) in investment to support the growth of its domestic semiconductor industry, including the creation of one of the world’s largest chipmaking clusters, and sharpening its focus on cutting-edge technology for long-term economic development.

Greater self-reliance for technology matters increasingly as aging demographics require South Korea to automate more aspects of its industrial activity. The nation has the world’s lowest fertility rate, and monetary officials worry that could push them harder toward easing to stimulate the economy in the long run at the risk of worsening household debt loads.

(Adds more details from release)

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