"Samsung and SK Hynix Overcome Middle East Shock"... IMF Significantly Raises Korea's Growth Forecast to 2.6%

World Economic Outlook Update Released on July 8

"Growth Forecast for This Year and Next Highest Among Advanced Economies"

The International Monetary Fund (IMF) has raised its forecast for South Korea's economic growth rate this year by 0.7 percentage points. Despite supply shocks from the war in the Middle East, the IMF expects the momentum from the artificial intelligence (AI)-driven semiconductor boom to continue, predicting that South Korea's growth rate this year and next will be the highest among major advanced economies.

President Lee Jae-myung is performing the national ceremony at the Southwestern Advanced Industry Development Vision National Report held at the Kim Dae-jung Convention Center in Gwangju on the 30th. Photo by Yonhap News Agency

On the night of July 8, the IMF released its "July World Economic Outlook Update." The IMF publishes its World Economic Outlook four times a year (January, April, July, and October). The April and October editions cover all member countries, while the January and July editions provide updated projections for the 30 major economies.

In this release, the IMF projected South Korea’s economic growth rate for 2026 at 2.6%. This is an upward revision of 0.7 percentage points from the April forecast. Among the 30 major countries included in the update, South Korea recorded the largest increase. The growth forecast for next year was also raised by 0.4 percentage points, reaching 2.5%.

A government official stated, "The growth forecasts for both this year and next are the highest among the advanced economies included in the update (South Korea, the United States, Japan, the United Kingdom, Germany, France, Australia, Canada, Italy, Spain, and the Netherlands). The fact that next year's growth outlook was raised along with this year's suggests that South Korea’s semiconductor and AI-related growth momentum is likely to continue into next year."

Meanwhile, the global economic growth rate for this year was forecast at 3.0%, down 0.1 percentage points from the April projection. The forecast for next year was raised by 0.2 percentage points to 3.4%. The IMF assessed that the growth trajectories of individual countries will diverge depending on their exposure to the war in the Middle East and their integration into the AI technology value chain.

The growth rate for the advanced economies group (41 countries, including South Korea, the United States, the United Kingdom, Germany, France, and Japan) was projected at 1.7% for this year, a downward revision of 0.1 percentage points compared to April. By country, the United States (2.3%) maintained its April forecast, supported by accommodative financial conditions and technological investment, as the impact of the war remains limited. In contrast, the eurozone (20 countries using the euro, 0.9%, down 0.2 percentage points from April) and Japan (0.6%, down 0.1 percentage points from April) were revised downward, reflecting the burden of higher energy prices.

The growth rate for the emerging and developing economies group (155 countries, including China, India, Russia, and Brazil) was also revised downward by 0.1 percentage points to 3.8% for this year. In China (4.6%, up 0.2 percentage points from April), robust advanced manufacturing and exports supported growth, but sluggish domestic demand and structural deceleration factors remained. In the Middle East and Central Asia (0.7%, down 1.2 percentage points from April), growth is expected to slow significantly this year due to disruptions in energy exports, but a rebound to 6.5% is forecast for next year as conditions normalize.

This year, the global inflation rate is projected at 4.7% (advanced economies 3.0%, emerging economies 5.8%), up 0.3 percentage points from April, driven by increases in energy and food prices. However, the core inflation rates in major countries are expected to gradually converge toward their targets. These forecasts are based on the scenario that, from mid-July 2026, disruptions to shipping through the Strait of Hormuz will ease, and that by around March next year, energy supply and logistics conditions will gradually recover and return to pre-war levels.

The government official added, "While external uncertainties remain due to persistent geopolitical risks, domestic economic challenges are also ongoing. The government will make every effort to stabilize consumer prices, support employment for vulnerable groups such as the youth, and narrow the gap between rich and poor. At the same time, it plans to proactively respond to industrial paradigm shifts such as AI and the green transition, and work to enhance medium- to long-term growth potential through economic and social structural reforms."

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