"Semiconductors Lift South Korea's Economy... Growth Could Reach 4% This Year" [Weekend Money]

Economic Growth Forecast Raised on Semiconductor Boom

Bank of Korea Governor Shin Hyunsong speaks at a press conference on the Monetary Policy Direction following a Monetary Policy Board meeting at the Bank of Korea in Jung-gu, Seoul, on Oct. 22, 2026. Photo by Kim Hyunmin.

Fueled by an unprecedented semiconductor boom, South Korea’s economic growth this year could approach 4%, according to a new forecast.

In a report titled “Q3 Stock Prices and GDP Growth: Riding the Semiconductor Roller Coaster,” released on Nov. 1, iM Securities said the domestic stock market underwent a sharp correction in the second half amid concerns about a slowdown in the artificial intelligence (AI) and semiconductor cycles, while third-quarter gross domestic product (GDP) growth surprised to the upside on the back of the semiconductor boom.

According to the Bank of Korea, South Korea’s GDP grew 1.0% quarter on quarter and 3.4% year on year in the third quarter. The biggest driver of the strong GDP growth was the semiconductor boom. Analysts say strong semiconductor exports and the resulting surge in corporate profits led to an expansion in facility investment.

iM Securities highlighted the sharp increase in real gross domestic income (GDI), along with the investment cycle, as a key development in third-quarter GDP. GDI rose 3.4% from the previous quarter and 18.8% from a year earlier. GDI measures the real purchasing power of final goods and services produced domestically. It is calculated by adjusting real GDP for real trading gains and losses resulting from changes in the terms of trade.

“The continued strong growth in GDI in the third quarter, following the second quarter, suggests that the increase in purchasing power driven by improving terms of trade, particularly for semiconductor prices, is gathering further momentum,” said Park Sanghyun, a senior researcher at iM Securities. “The rise in GDI also means that a strong corporate profit cycle, driven by exports and other factors, is continuing,” he added.

iM Securities revised its forecast for this year’s GDP growth to 3.8%, up from its initial estimate of 3.6%, citing the third-quarter GDP growth surprise and expectations that a strong export cycle led by semiconductors will continue into the fourth quarter. It added that annual growth of 4% cannot be ruled out, given that cumulative growth through the third quarter stood at around 3.6%, depending on the pace of growth in the fourth quarter.

However, it identified oil prices and stock prices as the biggest variables. If oil prices stabilize at lower levels in the fourth quarter as risks related to Iran ease, and stock prices rebound again, strong investment and consumption could drive a fourth-quarter GDP growth surprise and help annual growth reach 4%.

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