Korean Economy Projected to Grow 4% This Year, Driven by Semiconductor and AI Exports

Major domestic and international institutions are forecasting South Korea's economic growth rate to reach the 4% range this year, thanks to the booming semiconductor market and increased exports related to artificial intelligence (AI). These figures surpass previous expectations and heighten optimism for economic recovery.

U.K.-based economic analysis firm Capital Economics (CE) revised its forecast for South Korea's GDP growth this year to 4.0%, analyzing that AI-related exports will be the main driver of the Korean economy's growth.

Eleven domestic and international institutions have presented growth rates exceeding 3%, significantly surpassing the Bank of Korea's projection of 2.6% for the year. Among these, domestic institution Korean Re predicted 4.1%. Numerous overseas institutions, including JP Morgan (3.7%), National Australia Bank (NAB) and Australia and New Zealand Banking Group (ANZ) and iM Securities (each 3.6%), Bloomberg Economics and Citi (each 3.5%), and Bank of America (3.1%), ING and Germany's Dekabank (each 3.0%), offered growth rates substantially higher than the Bank of Korea's forecast of 2.6%.

Citi revised its growth forecast for South Korea this year upward from 3.1% to 3.5% on May 30th. The institution cited unexpectedly strong economic indicators, plans for technology equipment investment, and the possibility of a second supplementary budget of over 25 trillion won by early September as factors influencing the revision.

Korea Institute of Finance revised its growth forecast for South Korea this year upward from 2.0% to 3.0% on May 30th. The institute analyzed that the impact of rising international oil prices due to the Middle East conflict would be offset by export and investment booms driven by the semiconductor surge and the effects of supplementary budget execution.

The Bank of Korea presented its annual growth forecast for this year at 2.6% in May. Based on the preliminary Q1 growth rate (1.8%) and statements from the Bank of Korea governor, there is a possibility of an upward revision to the annual growth forecast in its updated economic outlook in August.