"South Korea's Economy Expected to Grow 4% This Year... Semiconductor Boom Drives Broad Upward Revisions"

Over 10 Domestic and Global Institutions Forecast Growth Above 3%

As the semiconductor market performs even more strongly than expected, projections have emerged that South Korea's economic growth rate could reach 4% this year.

According to the financial sector on July 1, UK-based Capital Economics (CE) recently raised its forecast for South Korea's real GDP growth rate this year to 4.0% in its latest report.

The institution had steadily increased its projection from 1.0% in February to 1.6% in March and 2.7% in April. This time, it raised its forecast by 1.3 percentage points, signaling expectations of rapid economic growth in South Korea this year. Capital Economics explained in its report that the adjustment was due to “the Korean economy riding a significant wave of export demand related to artificial intelligence (AI).”

Korean Re, a domestic reinsurer, put forward the highest growth forecast among domestic and international institutions, projecting a rate of 4.1%.

According to Bloomberg's tally, 10 out of 41 institutions included in the compilation forecast a growth rate of 3% or higher for this year.

Following Capital Economics and Korean Re, JP Morgan projected 3.7%, while National Australia Bank, Australia and New Zealand (ANZ) Bank, and iM Securities each forecasted 3.6%. Bloomberg Economics and Citi each predicted 3.5%. Bank of America projected 3.1%, and ING Financial Markets and Germany's DekaBank each forecasted 3.0%.

Upward revisions continue. Citi, which now expects 3.5% growth this year, raised its previous forecast by 0.4 percentage points from 3.1% just the day before. In its report, Citi cited “stronger-than-expected economic indicators in April and May, infrastructure investment driven by plans for technological facility investment, and the possibility of a second supplementary budget exceeding 25 trillion won being drawn up by early September” as the reasons for the upward adjustment.

On the same day, the Woori Financial Management Research Institute in South Korea also sharply raised its growth forecast from 2.0% to 3.0%. The institute similarly believes that, despite the international oil price shock stemming from the Middle East war, robust exports and investment driven by the semiconductor boom, as well as the effects of supplementary budgets, will offset downward pressures.

This has also drawn attention to the Bank of Korea's revised economic outlook, scheduled for July 27. In May, the Bank of Korea projected the nation's economic growth rate for this year at 2.6%. However, as the provisional growth rate for the first quarter has already been tallied at 1.8%, which is 0.1 percentage point higher than the initial estimate, it is highly likely that the May projection will be revised upward.

Bank of Korea Governor Rhee Changyong also stated at the Korean Economic Association academic conference on June 19 that “the annual growth forecast for this year will be revised upward from 2.6%, even if only mechanically.”

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