"10% Nominal Growth Rate... Allocation of Excess Semiconductor Tax Revenue Will Shape Korea's Future" [Click e-Stock]

"Focus on Nominal GDP Over Real GDP in the Current Phase"

Nominal Growth Rate Hits Highest Level Since the Mid-1990s

Tailwinds for Stocks, Headwinds for Bonds, Conditional Strength for the Won

When diagnosing the economic cycle, the commonly used yardstick is not nominal Gross Domestic Product (GDP), but rather the real GDP growth rate. This is because nominal GDP reflects both changes in output and price fluctuations, whereas real GDP shows changes in the quantity of goods and services after stripping out the effects of inflation, making it useful for gauging the true pace of economic expansion. For example, even if more goods are not produced but prices rise by 5%, nominal GDP increases. Therefore, to determine whether there has been an improvement in actual production and income activities, it is necessary to look at real GDP, which eliminates the impact of inflation.

Periods in which a gap opens up between nominal and real GDP have typically been interpreted in connection with rising consumer prices, that is, cost-push inflation.

However, recent analysis suggests that the current Korean economy cannot be explained by this conventional wisdom alone. Rather than inflation, the rise in semiconductor export prices is driving nominal growth, and how the resulting income is distributed will determine Korea’s long-term growth trajectory.

Nominal Growth Driven by Semiconductor Prices

Shinhan Investment Corp. researcher Ha Geonhyeong analyzed in a report titled “The Meaning of 10% Nominal Growth Rate in Korea” released on June 18, that “the key feature of the recent Korean economy is the surge in nominal GDP rather than real GDP.”

In the first quarter of this year, nominal GDP soared by 10.5% quarter-on-quarter and 17.1% year-on-year, marking the highest growth since the mid-1990s. During the same period, the real GDP growth rate was limited to 1.8% quarter-on-quarter and 3.8% year-on-year.

Ha explained that the rise in semiconductor export prices constitutes a price premium paid by global artificial intelligence (AI) companies rather than inflation borne by Korean households, and that this process represents nominal income generated from AI hardware bottlenecks flowing into the Korean economy, rather than cost-push inflation. The export share of related items such as semiconductors and computers has now reached 47% of total exports.

“Allocation of Excess Tax Revenue Will Determine Long-Term Growth and Korea’s Future”

Capture from Shinhan Investment Corp Report 'The Meaning of 10% Nominal Growth Rate in Korea'

The gains from rising prices are first reflected in corporate operating surpluses rather than wage income. The operating margin for comprehensive semiconductor companies jumped from 21.1% in 2025 to 50.9% in the first quarter of this year. Ha projects that the combined operating profit of these companies will exceed 600 trillion won this year, and with interim prepayments, excess tax revenue is expected to surpass 30 trillion won this year. Should profit forecasts be revised upward, tax payments for this year could exceed 40 trillion won, which is half of the projected annual corporate tax revenue of 84.6 trillion won in 2025.

However, the trickle-down effect is assessed to be limited. The combined domestic workforce of Samsung Electronics and SK hynix is about 160,000, which is only 0.6% of Korea’s total 28 million employed persons and approximately 2.5% of total employee compensation.

There are also concerns that with the combined capital expenditures (CAPEX) of major semiconductor firms accounting for about 20% of all capital investment, the concentration of capital in one industry and the subsequent suppression of investment in non-semiconductor sectors could undermine Korea’s long-term potential growth rate.

Ha emphasized, “To raise Korea’s potential growth rate, which has fallen to the high 1% range, excess tax revenue should be allocated to productivity transformation rather than consumed in short-term spending.” President Lee Jaemyung’s earlier remark that “spending everything as soon as it comes in is foolish,” and Deputy Prime Minister Koo Yooncheol’s statement that a significant portion of excess tax revenue would be channeled into a sovereign wealth fund, were interpreted as signals prioritizing productivity transformation.

Stock Market Tailwinds, Bond Market Headwinds, Conditional Strength for the Won

In the 2000s, Australia experienced a rise in nominal income first, followed by investment and employment due to the increase in raw material prices originating from China. However, as capital and labor concentrated in mining, the competitiveness of non-resource sectors weakened. The researcher points out that since the boom in specific industries does not guarantee balanced growth for the entire economy, this serves as a similar warning for the South Korean economy, which has become increasingly dependent on semiconductors. Screenshot from the report content

The stock market is expected to benefit directly as it is sensitive to nominal variables. As of the end of May, the 2026 KOSPI net profit consensus (the average of brokerage forecasts) exceeded 700 trillion won, up nearly 120% since the beginning of the year, and as large-cap semiconductor stocks led the rally, the KOSPI surged by more than 180% since the second half of 2025.

However, Ha assessed that the domestic service sector and traditional manufacturing industries are unlikely to enjoy the same benefits, and that focus should be placed on industries where upward revisions to earnings are confirmed.

The current phase is expected to weigh on the bond market. While consumer price index (CPI) inflation is projected to remain stable in the mid-to-high 2% range, in an environment where nominal GDP growth remains in double digits, there is limited room for government bond yields to fall.

The won is expected to show conditional strength. With this year’s current account surplus projected to exceed 300 billion dollars, more than double last year’s 123.1 billion dollars, and with a reduction in geopolitical risk and concurrent investment in new growth industries, the won-dollar exchange rate could fall below the 1,400 won level.

Ha reiterated, “The true significance of this cycle is not simply the rise in semiconductor prices, but how much this price increase is converted into productivity, fiscal stability, corporate investment, and household income for the Korean economy.”

This content was produced with the assistance of AI translation services.