Bank of Korea Raises 2026 Economic Growth Forecast to 3.3 Percent

The Bank of Korea (BOK) on Thursday raised its economic growth forecast for South Korea to 3.3 percent for this year, citing strong semiconductor exports driven by steady demand for artificial intelligence (AI) infrastructure.

The revision represents a 0.7 percentage-point increase from the BOK's previous forecast of 2.6 percent issued in May.

The central bank has raised its 2026 growth forecast two times since it projected 2 percent growth in February.

It marked the highest growth forecast issued by the central bank since 2021, when the BOK projected 4.7 percent growth.

The BOK's estimate is also higher than the South Korean government's 3 percent growth outlook published last month.

Recently, most global investment banks have revised their growth forecasts for the South Korean economy to 3 percent or higher, including 3.5 percent from Moody's and 3.4 percent from Morgan Stanley.

For 2027, the central bank estimated its growth outlook at 2.9 percent, up from 2.1 percent in May.

The South Korean economy grew 1.8 percent in the first quarter from a quarter earlier, marking the strongest quarterly growth since the third quarter of 2020, when the economy expanded 2.2 percent.

In the second quarter, Asia's fourth-largest economy expanded 0.6 percent, sharply exceeding the BOK's May forecast of 0.2 percent growth.

The BOK struck an optimistic tone on the semiconductor cycle next year, although semiconductor production growth is expected to slow slightly due to limited production capacity.

"Domestic demand and exports will likely show solid growth next year as the upcycle in semiconductors continues and its gains spill over into the broader economy," it said.

In a worst-case scenario involving pessimistic artificial intelligence (AI) investment, the South Korean economy would suffer a 0.1 percentage-point decline in growth in 2026 and a 0.04 percentage-point decline in 2027.

Meanwhile, the BOK retained its earlier forecast for consumer price inflation of 2.7 percent in 2026 and 2.3 percent in 2027.

Core inflation, which excludes volatile food and energy prices, is estimated at 2.5 percent this year, up from its previous forecast of 2.4 percent, due to lingering Middle East tensions.

"Core inflation is expected to accelerate as demand-driven inflation pressure is rising amid long-lasting cost-push inflation," Gov. Shin Hyun-song said during a press conference.