AI boom sustains S. Korea's growth despite global headwinds: IMF official

By Kang Yoon-seung

BANGKOK, Oct. 18 (Yonhap) -- South Korea appears to be weathering global economic headwinds thanks to the artificial intelligence (AI) boom, with the technology investment cycle unlikely to lose steam in the near term, a senior official at the International Monetary Fund (IMF) has said.

"Trade tensions among countries are putting negative pressure on the global economy," Choi Ji-young, executive director of the IMF Asia and the Pacific Constituency Office, said during a meeting with reporters in Bangkok on Thursday, citing the Middle East crisis and the war between Russia and Ukraine as lingering sources of uncertainty.

He was visiting Thailand to attend the 2026 Annual Meetings of the IMF and the World Bank Group.

"Despite these conditions, the growth forecast for South Korea has been revised upward," the director said.

Earlier this week, the IMF raised its growth forecast for South Korea in 2026 to 3.3 percent, citing strong semiconductor exports, driven by strong AI infrastructure demand, which more than offset the fallout from the Middle East war.

The figure was up 0.7 percentage point from the organization's July projection.

Choi said AI-related investment will likely continue for some time, citing robust investment in AI data centers and related infrastructure.

"Building AI data centers takes a long time, potentially around 10 years. Investment has only just begun, and these projects are unlikely to falter in a couple of years and make that investment meaningless," he said.

The IMF nevertheless sees significant potential downsides in AI, Choi added.

"South Korea could face a stock market correction, an adjustment in its current account and adverse effects on businesses should the AI boom falter," Choi said. "But within our organization, we expect AI investment to continue for a long time."

The executive director also noted the AI boom has expanded South Korea's fiscal room to invest more in future growth, setting the country apart from other nations.

He advised countries experiencing economic growth, such as South Korea, not to focus excessively on their debt-to-gross domestic product (GDP) ratios, but instead to prioritize investment in innovation and growth.

"In discussions with IMF staff, we point out that the fund's general policy advice does not fit South Korea's circumstances," Choi noted, adding the fund recognizes the country's unique situation.

"IMF staff share the view that South Korea should continue investing to enhance its growth potential," Choi said.

Turning to the Future Fund, which the government plans to launch next year using so-called windfall revenue from the chip supercycle to lay the groundwork for long-term growth, Choi said the IMF views its structure positively, although it has yet to offer a detailed assessment of the initiative.

Choi added the IMF's latest growth forecast for South Korea appears not to fully reflect the potential impact of policies aimed at boosting growth, suggesting the projection may be somewhat "conservative."