South Korea’s government has sharply raised its real gross domestic product (GDP) growth forecast for this year to 3.0%. Bolstered by strong semiconductor exports, nominal growth — which incorporates price increases — is expected to reach 12.3%, the highest level in 30 years.
The Ministry of Economy and Finance announced on the 14th in its “Second-Half 2026 Economic Growth Strategy” that real GDP is projected to grow 3.0% compared to last year. This represents a significant 1.0 percentage point increase from the 2.0% forecast presented in January. Lee Hyung-il, First Vice Minister of Economy and Finance, explained that “the forecast also reflects policy determination.”
The government’s latest projection surpasses estimates from domestic institutions such as the Bank of Korea (2.6%) and the Korea Development Institute (KDI, 2.5%), as well as international bodies including the OECD (2.6%), the International Monetary Fund (IMF, 2.6%), and the Asian Development Bank (ADB, 2.6%). If the 3.0% growth materializes as the government expects, South Korea’s economy would record its largest expansion in five years, since 2021 (4.7%).
The upward revision is anchored in the global semiconductor boom triggered by the AI transformation. The government explained that the forecast comprehensively reflects strong semiconductor exports, an early execution atmosphere for corporate facility investments following the recent announcement of three major mega-projects, and the policy effect of containing downside pressure from the Middle East conflict through a supplementary budget. The government also emphasized that its forecast incorporates performance data through last month, making it based on more recent indicators than projections released by other institutions in May and June.
Indeed, last month’s exports surged 70.9% year-on-year to $102.25 billion, surpassing the $100 billion mark for the first time in South Korea’s monthly export history. Total exports for the first half of the year also jumped 48.4% to $496.7 billion, setting a record for the same period.
The nominal growth rate forecast for this year, which accounts for the GDP deflator price index, was sharply raised from an initial 4.9% to 12.3%. This is the highest level in 30 years, since 1996 (12.3%), and marks the first double-digit nominal growth rate in 24 years, since 2002 (11.0%). The dramatic improvement in terms of trade, driven by soaring semiconductor export prices, is cited as the main factor. According to the government, semiconductor export price growth recorded triple digits for three consecutive months: 116.8% in March, 148.3% in April, and 163.3% in May, with the rate of increase continuing to expand.
The government forecast next year’s real GDP growth at 2.2% and nominal GDP growth at 4.6%. While the growth rate projections are somewhat lower due to the base effect from this year’s strong expansion, the economic growth momentum from the semiconductor boom is expected to remain solid, as U.S. market research firm Gartner and others project global DRAM revenue to continue increasing next year.
Fueled by the steep economic growth, per capita gross national income (GNI) is expected to approach $40,000 (approximately 60 million won) this year. Additionally, with the denominator — GDP — expanding, the national debt-to-GDP ratio is estimated to fall from an initial 50.6% to 47.0% this year, signaling a green light for the government’s goal of improving fiscal soundness through growth.
The consumer price inflation forecast for this year was raised from 2.1% in January to 2.6%. This reflects increased international oil price volatility due to the Middle East conflict and the weaker won. International oil prices based on Dubai crude rose from an average of $69 per barrel (approximately 100,000 won) last year to $92 (approximately 140,000 won) in the first half of this year. The won/dollar exchange rate (based on weekly closing prices) averaged 1,484.56 won (approximately $0.9956) in the first half, the second-highest level on record after the first half of 1998 (1,493.08 won) during the Asian financial crisis. However, the government’s consumer price forecast is slightly lower than those of the Bank of Korea (2.7%) and KDI (2.7%). Kang Ki-ryong, Deputy Minister for Economic Policy at the Ministry of Economy and Finance, explained, “We set it slightly lower than other institutions, anticipating the effects of various recent price management policies.” The consumer price inflation forecast for next year was presented at 2.2%.
The current account surplus for this year is projected at $290 billion. This far exceeds the January forecast ($135 billion surplus) and is expected to shatter the record surplus of $123.1 billion set just last year within a single year. Customs-cleared export growth is expected to increase 40% year-on-year, while import growth is projected at 20% — roughly a tenfold expansion from the January forecasts (exports 4.2%, imports 2.0%). Next year’s current account surplus is forecast at $245 billion, with export growth of 1.0% and import growth of 3.0%.
Private consumption is projected to grow 2.0% this year, supported by stock market vitality and improved consumer sentiment, and is expected to increase 2.1% next year as income and asset conditions improve on the back of strong exports. Facility investment is forecast to rise 5.0% this year, centered on semiconductor manufacturing equipment, and grow 3.3% next year driven by semiconductor plant expansions and investments from the National Growth Fund. Construction investment is projected to increase 0.2% and 0.8% this year and next, respectively.
Despite the improved growth rate, the increase in employment is estimated at 150,000 this year, down from the initial forecast of 160,000. The employment rate forecast remains unchanged at 63.0%. This is attributed to the fact that the semiconductor industry, which is leading this year’s economic growth, does not have a significant employment inducement effect. Next year, the employment increase is forecast to improve slightly to 170,000, with an employment rate of 63.1%.
Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol reported the “Second-Half Economic Growth Strategy” containing these details at a Cabinet meeting presided over by President Lee Jae-myung on the same day. Using these changing macroeconomic conditions as a springboard, the government aims to make this year the “inaugural year of a great economic leap toward an irreplaceable Republic of Korea.” Starting in the second half, it plans to pursue six major tasks across three areas: strategic and stable macroeconomic management in the post-Middle East conflict era; a rebound in potential growth rate by fostering globally dominant growth engines; and overcoming sectoral polarization while initiating structural innovation in earnest.