Photo : YONHAP News
A state-run think tank has projected that the South Korean economy will expand two-point-five percent this year, higher than previously forecast, on the back of strong growth in the semiconductor industry.
The Korea Development Institute(KDI) on Wednesday released its latest economic outlook raising its 2026 growth projection by zero-point-six percentage points from the one-point-nine percent forecast it gave in February.
The figure is higher than the two percent expansion projected by the Bank of Korea and the government, and much higher than the growth forecasts of one-point-seven percent and one-point-nine percent made by the OECD and IMF, respectively.
The KDI noted that despite challenging business conditions, the economy has been showing signs of improvement this year due to strong semiconductor exports and improved domestic consumption.
In particular, the KDI explained that the impact of strong semiconductors has been enough to make up for some of the fallout of the Middle East war.
Facility investment is projected to grow three-point-three percent in 2026 and two-point-four percent in 2027.
The KDI also predicted that exports will rise around four-point-six percent, driven by semiconductors, and remain in good shape next year, rising two-point-two percent.
Domestic consumption is expected to increase two-point-two percent this year due in part to the government’s subsidy policies, before rising one-point-five percent next year.
The economy is projected to expand one-point-seven percent in 2027, according to the outlook.
However, the KDI warned that if the conflict in the Middle East intensifies or drags on, there is a possibility that growth will weaken due to disruptions in raw material supply and demand and higher production costs.