ADB Raises Korea's Economic Growth Forecast from 1.9% to 2.6%... "Driven by Semiconductor Boom"

Growth Forecast Raised by 0.7 Percentage Points from April

Economic Upturn Expected; Next Year's Growth Also Upgraded

Taiwan and Singapore See Simultaneous Jumps

The Asian Development Bank (ADB) has significantly raised its economic growth forecast for South Korea this year, lending strong support to the country’s economic recovery momentum. The upgrade is attributed to the global semiconductor boom driven by the artificial intelligence (AI) wave, as well as the effectiveness of government measures in response to Middle Eastern tensions.

A view of the construction site of the Yongin Semiconductor Cluster General Industrial Complex in Yongin, Gyeonggi Province. Photo by Yonhap News Agency.

According to the Ministry of Economy and Finance on July 9, the ADB, in its newly released “Asian Development Outlook (ADO),” forecast South Korea’s economic growth rate for 2026 at 2.6%, up 0.7 percentage points from its April projection of 1.9%. The growth forecast for next year (2027) was also raised by 0.1 percentage point to 2.0%.

This is due to stronger-than-expected growth confirmed in the first quarter of this year, as well as explosive demand for semiconductors, South Korea’s main export item. The ADB noted that expanding exports driven by rising global demand for artificial intelligence (AI) will serve as the key growth engine for the South Korean economy over the next two years. While there are concerns about supply chain disruptions due to geopolitical risks, the unprecedented semiconductor boom is expected to fully offset such downward pressures.

In addition, the ADB projected that robust earnings among IT companies, a bullish stock market, and government support measures will collectively keep domestic consumption on a stable track. Advanced Asia-Pacific economies (AAP) sharing the semiconductor sector also saw upward revisions: Taiwan’s growth forecast soared by 1.9 percentage points to 9.5% compared to April, Singapore’s rose by 1.2 percentage points to 3.2%, and Hong Kong’s increased by 0.4 percentage points to 3.0%. In contrast, Japan (0.7%) and Australia (2.0%), which are less directly linked to the IT sector, saw their forecasts remain unchanged.

However, high oil prices are expected to put a strain on household finances. The ADB predicted that the rise in international energy prices will be fully reflected in consumer prices, driving South Korea’s inflation rate to 2.7% this year and 2.2% next year. These figures are 0.4 and 0.2 percentage points higher, respectively, than the April projections.

Meanwhile, the ADB cited several potential downside risks for the South Korean economy: prolonged energy supply disruptions due to escalating Middle East conflicts; renewed pressure from the United States for tariff reimposition; and the possibility of corrections in domestic and global stock markets.

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