Media365
South Korea has raised its 2026 economic growth forecast to 3.0 per cent, the highest in five years, as a global artificial intelligence (AI) boom drives demand for semiconductors and strengthens the country’s export outlook.
The Ministry of Economy and Finance on Tuesday projected Asia’s fourth-largest economy to grow at 3.0 per cent this year, up from its previous estimate of 2.0 per cent and last year’s growth rate of 1.1 per cent.
The upgraded forecast reflects stronger-than-expected exports, particularly from the semiconductor sector, which has benefited from a global surge in AI investment and rising demand for advanced computing infrastructure.
AI, semiconductors become key pillars of growth strategy
South Korea’s government said it will accelerate investments in AI, semiconductor manufacturing and data centre infrastructure as part of efforts to lift the economy’s potential growth rate to 3 per cent from below 2 per cent currently.
The finance ministry said it would fast-track three major projects announced last month, focusing on semiconductors, AI data centres and physical AI technologies.
The government sees these sectors as critical to maintaining South Korea’s competitiveness as countries race to expand AI capabilities and secure supply chains for advanced chips.
“While robust economic indicators, such as exports, driven by a semiconductor boom are clearly opportunity factors, there remain tasks that our economy needs to overcome at the same time,” Vice Finance Minister Lee Hyoung-il said.
South Korea’s economy recorded its strongest quarterly growth in nearly six years in the latest period, helped by strong chip exports amid a worldwide increase in AI-related spending.
Seoul plans higher spending to support expansion
The government is also preparing a major increase in public spending to support growth. Earlier this week, Seoul said it plans to raise its 2027 budget by at least 10 per cent to more than 800 trillion won ($532.73 billion).
A significant share of the additional spending will be directed towards strategic projects in AI and semiconductors. Officials expect stronger tax revenues from the chip industry to provide additional fiscal support.
South Korea is aiming to raise per capita gross national income to $50,000 from an expected $40,000 this year. It also wants to become one of the world’s four largest exporters, improving its position among the top five exporters currently.
Inflation outlook worsens amid oil price pressures
Despite the stronger growth outlook, the government warned of risks from inflation, currency weakness and higher borrowing costs.
The ministry raised its 2026 inflation forecast to 2.6 per cent from an earlier projection of 2.1 per cent, citing elevated oil prices linked to geopolitical tensions, including the West Asia conflict.
The new inflation estimate would mark the fastest pace since 2023 and exceed last year’s 2.1 per cent increase in consumer prices.
To manage price pressures, the government said it would extend foreign exchange regulatory easing, introduce fuel price caps and provide low-cost policy loans during the second half of the year.
For 2027, South Korea expects economic growth to moderate to 2.2 per cent, while inflation is projected to ease to 2.2 per cent.
The revised outlook underlines the growing role of AI-driven demand in South Korea’s export-led economy, with the country’s major chipmakers positioned to benefit from the global race for AI infrastructure.
