"Semiconductor Effect Could Push Growth Above 3.5%... Forecast Raised Again [Monetary Policy Poll]②"

Survey of 14 Domestic and International Economic Experts by The Asia Business Daily

More Experts Forecast Korea's Growth Rate "Over 3.0%"

"Semiconductor Supercycle Drives Exports and Facility Investment"


Inflation Concerns Persist

Ahead of the Bank of Korea's base rate decision on July 16, most domestic experts have raised their forecasts for South Korea's economic growth rate this year. This is based on the expectation that the semiconductor supercycle—now entering a boom period—will significantly boost the growth rate by driving both exports and facility investment. Additionally, with the government's expansionary fiscal policy in play, a number of experts predict that this year's growth rate will surpass 3.5%.

However, concerns over inflation remain. In addition to high oil prices and a strong dollar-won exchange rate, some experts warned that the overwhelming growth in semiconductors could revive demand and fuel inflation. While consumer price growth is expected to moderate somewhat next year, inflation and the semiconductor boom are seen as the key variables for monetary policy in the second half of this year.

Most experts see this year’s growth rate exceeding 3.0%... 8 out of 11 raise forecasts

According to a survey conducted by The Asia Business Daily from July 7 to July 10 of this year, targeting 14 economic experts from domestic and international economic research institutes, securities firms, and banks, more than half of respondents (6 experts, 3 non-responses) forecast that South Korea’s economic growth rate will exceed 3.0% in 2026. Specifically, 2 experts forecast 3.0%—the most common response—while 1 expert projected 3.1%. Three experts anticipated a growth rate above 3.5%, with one each forecasting 3.5%, 3.6%, and 3.7%.

Two experts projected a 2.6% growth rate, in line with the Bank of Korea’s forecast announced last May. Additionally, two experts forecast 2.8%, and one projected 2.9%. Out of the 11 experts who responded to the growth rate question, 9 expected South Korea's economic growth rate this year to surpass the Bank of Korea's forecast.

In the previous survey, the upper bound of growth forecasts was 3.0%, but in this survey, it has risen to 3.7%. Eight out of the 11 respondents (72.7%) raised their growth forecasts compared to the previous survey.

Experts who revised their forecasts upward cited the semiconductor supercycle, which has led to an export boom exceeding expectations, and facility investment driven by the semiconductor sector, which is expected to improve domestic growth momentum.

Sukgil Park, economist at JP Morgan, who raised his growth forecast from 3.0% in May to 3.7%, stated, "The semiconductor cycle will drive growth, centering on exports and facility investment."

Moonjong Heo, head of the Woori Financial Management Research Institute, who raised his forecast by 1 percentage point from 2.0% to 3.0%, also said, "Despite external uncertainties stemming from the Middle East and sluggish construction investment, the semiconductor sector will lead strong exports, a recovery in facility investment, and an improvement in private consumption due to increased income."

Additional tax revenues resulting from the government’s expansionary fiscal spending and the semiconductor boom were also cited as reasons for the upward revision to the growth outlook.

Yonggu Cho, researcher at Shin Young Securities, commented, "While exports are performing well, the investment sector is also expected to contribute more to growth than previously anticipated. Both private consumption and fiscal spending are showing resilient trends."

Sanghyun Park, researcher at iM Securities, raised his growth forecast from 2.8% to 3.6%, citing "favorable semiconductor market conditions and expansionary fiscal policy" as the main reasons.

However, many believe that next year’s growth rate will likely be somewhat lower than this year’s. Four out of ten respondents forecast next year’s growth at 2.3%, the most common response. Two experts each predicted 2.2% and 2.7%, while one each projected 1.9% and 3.0%.

Junhee Han, senior researcher at NH Financial Research Institute, said, "Next year, growth is expected to slow somewhat compared to this year due to easing semiconductor bottlenecks and deepening polarization." Yeosam Yoon, researcher at Meritz Securities, also noted, "Weakness in domestic demand, such as sluggish employment, remains an issue."

High oil prices, strong dollar, and semiconductor-driven demand pressure...Inflationary concerns persist

Many experts also raised their forecasts for this year’s consumer price inflation rate compared to previous estimates. Five experts (3 non-responses) projected a 2.7% increase—the same as the Bank of Korea’s forecast—making it the most common response, followed by three experts forecasting 2.6%. One expert each projected 2.5%, 2.8%, and 3.0%; a forecast in the 3.0% range was cited for the first time this year.

Experts believe that inflationary shocks stemming from the U.S.-Iran conflict will not subside quickly, and that the high inflation trend could persist at least through the second half of the year. They pointed out that, despite an agreement to end hostilities, risks remain as the U.S. and Iran continue intermittent clashes. Junhee Han, senior researcher, said, "As sporadic clashes between the U.S. and Iran continue, upward pressure on international oil and commodity prices persists, while the burden of import prices due to the weak won is limiting the pace of inflation slowdown."

The semiconductor boom was also cited as an additional factor pushing up inflation. As semiconductor industry performance improves, national purchasing power rises and private consumption increases, creating stronger demand-side inflationary pressure. There were also concerns that rising semiconductor prices could lead to higher prices for finished goods such as smartphones and PCs.

Sungsoo Kim, researcher at Hanwha Investment & Securities, said, "It is necessary to consider the strengthened demand-side pressure." Researcher Sanghyun Park diagnosed, "There is a possibility of 'chipflation.'"

However, there are also forecasts that inflationary pressure will ease somewhat starting in the second half of the year. Researcher Yonggu Cho stated, "If we exclude the impact of SK Telecom’s rate cuts last year, the real inflation peak for this year was in June. Inflation is expected to return to the high 2% range in the fourth quarter."

Most experts expect that, as geopolitical risks in the Middle East ease next year, consumer price inflation will drop to 2.2-2.3% (6 experts). Researcher Yeosam Yoon said, "Although uncertainties remain, oil prices have stabilized rapidly, and if the exchange rate stabilizes in the second half, inflation pressures are expected to ease further next year."

Inflation response remains the top monetary policy variable... Exchange rate and semiconductor-driven growth also in focus

While a base rate hike is widely anticipated this month, experts believe that response to inflation remains the central factor in monetary policy. Of the 14 respondents, 9 (multiple responses allowed) cited 'inflation concerns' as the main variable. Growth driven by the semiconductor boom and a strong exchange rate were each cited by 5 experts as important variables.

With the Bank of Korea focusing its monetary policy on price stability, experts noted that the pace and frequency of rate hikes may vary depending on the growth impact of the semiconductor boom and exchange rate movements. Yunmin Baek, researcher at Kyobo Securities, commented, "While inflation is the most critical factor for monetary policy, exchange rate movements are just as important. Recent hawkish remarks by Bank of Korea Governor Shin Hyun-song may have been made with the exchange rate in mind, rather than solely inflation."

Although a rising exchange rate is a key variable to watch in terms of financial stability, some experts pointed out that there are limits to how much monetary policy can address it. Senior researcher Junhee Han said, "Exchange rate is an important variable, but with external factors playing a major role at present, there are significant constraints on the Bank of Korea’s ability to respond directly."

Some experts highlighted the semiconductor boom as the key variable. Seungwon Kang, researcher at NH Investment & Securities, stated, "The core of the Korean economy right now is semiconductor exports. The key factor in this rate hike cycle decision was likely the semiconductor boom." Yeha Ahn, researcher at Kiwoom Securities, also predicted, "Whether the current upward trend in semiconductor exports—which is the main driver behind the raised growth outlook—slows down will determine when the rate hike cycle ends."

Experts who participated in the survey (in alphabetical order)

Seungwon Kang, researcher at NH Investment & Securities; Gongdong Rak, researcher at Daishin Securities; Sungsoo Kim, researcher at Hanwha Investment & Securities; Jinwook Kim, chief economist at Citibank; Hongchul Moon, researcher at DB Securities; Sanghyun Park, researcher at iM Securities; Sukgil Park, economist at JP Morgan; Yunmin Baek, researcher at Kyobo Securities; Yeha Ahn, researcher at Kiwoom Securities; Jaekyun Ahn, research fellow at Korea Investment & Securities; Yeosam Yoon, researcher at Meritz Securities; Yonggu Cho, researcher at Shin Young Securities; Junhee Han, senior researcher at NH Financial Research Institute; Moonjong Heo, head of Woori Financial Management Research Institute.

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