South Korea Raises 2026 Growth Forecast to 2.5% on AI Chip Boom

The Korea Development Institute (KDI) raised South Korea's 2026 economic growth forecast from 1.9% to 2.5%, citing a semiconductor boom driven by global AI demand that is reshaping the country's economic outlook. The upward revision, announced on May 13 and reinforced with additional detail on May 14, projects exports rising 4.6%, facility investment increasing 3.3%, and private consumption growing 2.2% this year. KDI also forecast a record-high current account surplus of USD 240 billion in 2026.

Goldman Sachs described the phenomenon as an "AI-driven super surplus," predicting the current account surplus will exceed 10% of GDP. The windfall has given the government fiscal room to counter external headwinds from Middle East conflicts and U.S. tariff policies. President Lee Jae Myung introduced a supplementary budget funded by excess chip export tax revenue and advocated for expansionary fiscal policy, while presidential policy adviser Kim Yong-beom proposed "citizen dividends" to redistribute AI-era earnings.

Fitch Ratings affirmed that South Korea has room for active fiscal spending without jeopardizing its credit stability. However, Goldman Sachs economists expect the Bank of Korea to raise interest rates in the third and fourth quarters to manage the recovery and currency appreciation. KDI warned that persistently high oil prices and potential Strait of Hormuz blockades could raise production costs, projecting consumer inflation at 2.7% in 2026 before easing to 2.2% in 2027. Growth is expected to moderate to 1.7% in 2027, and KDI recommended that fiscal policy focus on boosting potential growth and supporting income-vulnerable groups while domestic chipmakers expand production capacity.