The International Monetary Fund (IMF) and the Asian Development Bank (ADB) have both sharply raised their growth forecasts for South Korea’s economy this year to 2.6%. The assessment is that the semiconductor export boom driven by the artificial intelligence (AI) boom has overwhelmed all downward pressures, even amid strong headwinds from global supply shocks and surging energy prices triggered by the Middle East conflict.<\/p>\n
According to South Korea’s Ministry of Economy and Finance, the ADB raised its forecast for South Korea’s real gross domestic product (GDP) growth this year to 2.6% in a supplementary report to its “Asian Development Outlook” released on the 8th (local time), up 0.7 percentage points from its April forecast of 1.9%. Next year’s growth forecast was also raised by 0.1 percentage points to 2.0%. The ADB analyzed that “export expansion driven by rising global AI demand will be the main driver of South Korea’s economic growth this year and next,” adding that “even if rising energy prices increase production costs and disrupt supply chains, the semiconductor boom will offset the downward pressure.”<\/p>\n
A day earlier, the IMF also revised its forecast for South Korea’s growth to 2.6% in its “July World Economic Outlook Update.” This marks a 0.7 percentage point increase from its April forecast, the largest upward revision among the 30 major countries covered in the report. The IMF classified South Korea alongside Taiwan, Thailand, and Malaysia as the “top four net exporters of AI hardware,” noting that “despite high dependence on Middle Eastern energy imports, first-quarter growth reached an annualized rate of 7.5%, far exceeding the initial forecast of 1.8%, thanks to strong exports of semiconductors and AI-related hardware.” The IMF also raised its growth forecast for next year by 0.4 percentage points to 2.5%, the highest level among advanced economies.<\/p>\n
With this, the growth outlook for South Korea from major domestic and international institutions is converging at 2.6%, adding to the 2.6% forecasts already presented by the Organisation for Economic Co-operation and Development (OECD) and the Bank of Korea. Last month, the OECD raised its growth forecast for this year by a substantial 0.9 percentage points from 1.7% to 2.6% in its “2026 OECD Economic Survey: Korea,” diagnosing a recovery trend despite internal and external shocks from martial law and the Middle East conflict.<\/p>\n
The view from private financial markets is even more optimistic. According to the Korea Center for International Finance, the average growth forecast for South Korea’s economy this year from eight major overseas investment banks (IBs) reached 3.0% as of the end of June, entering the 3% range for the first time ever. JPMorgan Chase raised its forecast to 3.7%, Citigroup to 3.5%, with HSBC Holdings at 2.8%, Goldman Sachs at 2.7%, and Barclays at 2.7% joining the successive upward revisions. Some institutions even forecast growth around 4%. UK-based Capital Economics suggested a 4.0% growth possibility, while Korean Re projected 4.1%.<\/p>\n
Behind these upward revisions lies record-breaking semiconductor export performance. According to preliminary balance of payments statistics released by the Bank of Korea on the 8th, the May current account surplus reached $38.61 billion (approximately 58.2 trillion won), a record high on a monthly basis. This surpasses the previous record of $37.93 billion set in March. The current account has maintained a surplus streak for 37 consecutive months since May 2023, with the cumulative surplus from January to May alone reaching $141.28 billion, already exceeding last year’s annual surplus of $123.05 billion.<\/p>\n
By category, the goods account surplus recorded $37.86 billion, ranking first in history. Looking at export growth rates by item on a customs clearance basis, computer peripherals surged 249.4% and semiconductors 167.7%, leading the growth trend, while petroleum products (49.1%) and chemical products (11.0%) also showed high growth rates.<\/p>\n
The Korea Development Institute (KDI) diagnosed in its “Economic Trends July Issue” released on the same day that “although manufacturing production has adjusted, the economy is maintaining a moderate improvement trend thanks to strong semiconductor exports and service sector performance,” using the expression “moderate improvement” for the second consecutive month. In particular, service sector output in May increased 4.9%, led by financial and insurance services (10.4%) and professional, scientific, and technical services (17.5%), while the retail sales index rose 1.7% year-on-year, raising expectations for a domestic demand recovery.<\/p>\n
In contrast, the outlook for the global economy is starkly different. Reflecting the supply shock from the Middle East conflict, the IMF lowered its global economic growth forecast for this year by 0.1 percentage points to 3.0%, down from 3.1% in April. The advanced economies group was lowered to 1.7%, and the emerging and developing economies group to 3.8%. Only the United States (2.3%) maintained its existing forecast, while the Eurozone (0.9%) and Japan (0.6%) were revised down by 0.2 and 0.1 percentage points, respectively, due to energy price burdens. Saudi Arabia saw a sharp downgrade from 3.1% to 1.7%.<\/p>\n
The IMF diagnosed that “the global economy is simultaneously affected by two opposing currents: the supply shock from the Middle East conflict and the AI-led technology cycle,” adding that “growth paths will diverge depending on countries’ exposure to the Middle East conflict and their integration into the AI technology value chain.” Semiconductor powerhouses like South Korea, Taiwan (9.5%), and Singapore (3.2%) are enjoying the benefits of AI value chain integration and pulling ahead, while countries with high dependence on energy exports or weak manufacturing competitiveness are absorbing the shock entirely.<\/p>\n
Inflationary pressure is an unavoidable challenge for South Korea as well. Reflecting the rise in international energy prices, the ADB raised its forecast for South Korea’s consumer price inflation this year by 0.4 percentage points from April to 2.7%, and next year’s by 0.2 percentage points to 2.2%. The analysis suggests that high oil prices and elevated exchange rates are acting as upward pressure on prices, which could lead to a burden of base rate hikes and potentially constrain future consumption improvement.<\/p>\n
Both the IMF and ADB made clear that their forecasts are based on the assumption that the Middle East situation will gradually stabilize in the second half of the year and that energy and logistics conditions will normalize. The IMF noted that “risks to the global economy are somewhat more balanced than in April, but downside factors still dominate,” citing uncertainty in the Middle East, trade fragmentation, and weakening policy capacity in some countries as key risk factors. It also warned that if expectations for AI falter, it could act as a downside factor dampening consumption and financial markets.<\/p>\n
South Korea’s Ministry of Economy and Finance assessed that “the upward revision of growth forecasts for both 2026 and 2027 suggests that South Korea’s semiconductor and AI-related growth momentum is likely to continue into next year.” However, it added that “while external geopolitical risks persist with ongoing uncertainty, and domestic livelihood difficulties continue, the government plans to focus all efforts on stabilizing consumer prices, supporting employment for vulnerable sectors such as youth, and resolving polarization.” The government is scheduled to announce revised forecasts in its second-half economic growth strategy next week.<\/p>\n","protected":false},"excerpt":{"rendered":"The International Monetary Fund (IMF) and the Asian Development Bank (ADB) have both sharply raised their growth forecasts…\n","protected":false},"author":2,"featured_media":80116,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[456],"tags":[2588,849,845,846,3166,7407,43126,1219,43128,2265,8797,43127,276,1136],"class_list":["post-80115","post","type-post","status-publish","format-standard","has-post-thumbnail","category-bank-of-korea","tag-artificial-intelligence","tag-asian-development-bank","tag-bank-of-korea","tag-bok","tag-goldman-sachs","tag-hsbc","tag-international-monetary-fund","tag-jpmorgan-chase","tag-korea-development-institute","tag-middle-east-conflict","tag-ministry-of-economy-and-finance","tag-organisation-for-economic-co-operation-and-development","tag-samsung-electronics","tag-semiconductors"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/80115","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/comments?post=80115"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/80115\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media\/80116"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media?parent=80115"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/categories?post=80115"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/tags?post=80115"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}