ADB Raises Korea's Growth Forecast from 2.6% to 3.2%... Semiconductor Exports and Private Consumption Recovering

AI Semiconductor Demand Fuels Export Growth
Korea’s GDP Growth Forecast for Next Year Raised to 2.3%, Up by 0.3 Points

The Asian Development Bank (ADB) has revised its economic growth forecast for South Korea this year upward to 3.2%. This adjustment reflects increased exports driven by growing global demand for artificial intelligence (AI) semiconductors and a recovery in private consumption as corporate performance improves.

On September 23, in its newly released "Asian Economic Outlook," the ADB projected South Korea's real GDP growth rate this year at 3.2%. This figure is 0.6 percentage points higher than the 2.6% presented in the July supplementary outlook, and 1.3 percentage points higher than the 1.9% forecast released in April. The ADB's forecast for Korea's growth this year is similar to projections made by major domestic institutions. Last month, the Bank of Korea raised its outlook from 2.6% to 3.3%. The Korea Development Institute (KDI) expects 3.2%, the government projects 3.0%, and international credit rating agency Moody's forecasts 3.5%.

President Donald Trump signed a proclamation imposing a 25% tariff without exceptions on steel and aluminum products imported into the United States and announced that tariffs on automobiles and semiconductors are also under consideration. On February 13, 2025, export vehicles and containers are waiting to be loaded at Pyeongtaek Port, Gyeonggi Province. Photo by Kang Jinhyung

The ADB cited robust manufacturing indicators in July and August, as well as increased exports due to rising global AI semiconductor demand, as major reasons for the upward revision. The bank also expects private consumption to recover moderately, backed by expansionary fiscal policies and improved corporate earnings. In fact, strong semiconductor exports are serving as a key driver behind Korea's outperformance this year. Previously, the Bank of Korea also raised its growth outlook, viewing the surge in semiconductor-centered exports as offsetting downward pressures on growth. According to the Korea Customs Service, semiconductor exports from September 1–20 totaled $34.1 billion, an increase of 259.4% year-on-year—a record for this period.

The ADB also upgraded its economic growth forecast for South Korea next year to 2.3%, up from the previous 2.0%, and 0.4 percentage points higher than its April forecast of 1.9%. This adjustment is based on expectations that favorable semiconductor market conditions and a domestic demand recovery will continue into next year. However, rising geopolitical tensions, increased volatility in global financial markets, and the risk of reduced exports and investment from additional U.S. tariff hikes are cited as downside risks. Even if the recovery continues, ADB notes that external uncertainties persist.

The ADB maintained its inflation forecast for South Korea this year at 2.7%, the same as in July. While upward pressure on prices is expected to persist due to rising international energy costs and robust domestic demand, government price stabilization policies are anticipated to partially offset this. The inflation outlook for next year is 2.2%.

The ADB forecasted economic growth for developing countries in the Asia-Pacific region at 5.0% this year, a 0.1 percentage point increase from its July projection (4.9%), but a 0.1 percentage point decrease compared to its April forecast (5.1%). The revision reflects stronger private investment, government stimulus measures, and improved exports in AI-related industries. Next year’s growth outlook for the region remains at 5.1%, unchanged from both April and July forecasts.

For inflation in developing countries within the Asia-Pacific, the ADB projected a rate of 4.2% this year, down 0.1 percentage point from its July forecast (4.3%). The revision reflected weaker demand due to price stabilization measures in China and South Asian nations. However, for next year, the inflation forecast was raised by 0.1 percentage point to 3.5%. The ADB cited the extended impact of the El Niño phenomenon on overall economic activity as the reason for the upward adjustment.

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