IMF Raises South Korea's 2026 Growth Forecast to 2.6%

By Kang Yoon-seung

SEJONG, July 8 (Yonhap) -- The International Monetary Fund (IMF) on Wednesday revised up its growth forecast for South Korea in 2026 to 2.6 percent, as strong global demand for memory chips offset the negative impact of the Middle East war.

The Washington-based organization released the assessment in the World Economic Outlook Update report, raising its forecast by 0.7 percentage point from its April projection, as strong external demand for semiconductors outweighed the impact of the war and reflected momentum in the global technology cycle.

"In Korea, growth is expected to rise to 2.6 percent in 2026 and 2.5 percent in 2027, buoyed by strong external demand for semiconductors, which dominates the negative impact of the war," the IMF said.

The IMF had projected growth of 1.9 percent and 2.1 percent for 2026 and 2027, respectively, in its April report.

Touching on the world economy, the IMF said global growth is expected to reach 3 percent in 2026, down 0.1 percentage point from the previous outlook. The projection for 2027 was revised up by 0.2 percentage point to 3.4 percent.

"The modest slowdown reflects the effects of the war in the Middle East being partly offset by accelerated demand-driven momentum in the global technology cycle thanks to advances in artificial intelligence (AI) and its adoption," the report said.

"The impact varies widely based on countries' exposure to the war and position in the technology value chain," it added.

The group of advanced economies, which covers 41 economies, including South Korea, was projected to expand 1.7 percent in 2026, down 0.1 percentage point from the previous estimate.

"Net energy exporters are partly cushioned by favorable terms-of-trade effects, whereas net energy importers experience a more pronounced drag from higher energy prices unless they are lifted by technology-related activity," the IMF said.

Responding to the report, the Ministry of Finance and Economy said it was notable that South Korea's growth forecasts for both 2026 and 2027 were the highest among the advanced economies covered in the IMF report.

"The outlook indicates South Korea's growth momentum related to chips and AI is expected to continue next year as well," the finance ministry said.

The ministry, however, noted geopolitical uncertainties are also expected to continue, adding that the government will focus on bolstering long-term growth potential by preemptively addressing industrial paradigm shifts, such as AI and green transformations.

Last month, the Organization for Economic Cooperation and Development (OECD) raised its outlook for South Korea's economic growth in 2026 to 2.6 percent from 1.7 percent three months earlier, also citing the AI boom.