The Korea Development Institute (KDI), a government-funded research institution, has raised its growth forecast for this year from 2.5% to 3.2%, reflecting the strong performance of the semiconductor sector. The revised figure is 0.7 percentage points higher than the previous forecast, with analysis indicating that 0.6 percentage points of this increase are attributable to the semiconductor industry and its ripple effects.
On the 19th, KDI released its "Economic Outlook," presenting a growth forecast of 3.2% for this year. This is 0.7 percentage points higher than the previous forecast of 2.5%, which was announced in May.
KDI cited the semiconductor boom as the primary reason for upgrading the growth forecast. With global semiconductor demand exceeding expectations, its impact is expected to spread to exports and capital investment this year. In particular, it is projected that some of these effects will also extend to private consumption next year.
Kim Mi-ru, a senior researcher at KDI's Macroeconomics and Finance Division, stated, "Roughly 0.6 percentage points of the upward revision can be attributed to the semiconductor sector and its ripple effects." She added, "More than half of this year's growth rate (3.2%) compared to last year's GDP (gross domestic product) is accounted for by semiconductors."
She further noted, "Although nominal growth rates are not officially disclosed, the GDP deflator directly linked to it has risen significantly due to rising semiconductor prices." She concluded, "Based on our current forecast alone, we can only say that our projected level exceeds the government's official nominal growth rate figure of 12.3%."
KDI forecasts export growth (based on total exports and volume) at 8.7% this year and 5.0% next year. This projection reflects robust investment in global AI (artificial intelligence), even amid U.S. tariff measures and geopolitical instability in the Middle East.
Notably, gross domestic income (GDI) growth is expected to significantly outpace GDP growth. Despite rising crude oil import prices, a sharp increase in semiconductor export prices has led to a substantial improvement in terms of trade (the ratio of export prices to import prices).
As a result, the current account balance is projected to reach an unusually high surplus of $360 billion for both this year and next. This is approximately three times higher than last year's figure of $123.1 billion. The revised forecasts are also $120 billion and $140 billion higher, respectively, compared to the previous May projections.
Capital investment is expected to grow by 7.9% this year and 7.0% next year, centered on semiconductors, driven by expanded global AI infrastructure investments. Private consumption is projected to rise by 2.3% this year and 2.0% next year due to increases in real gross income, but the improvement is expected to be somewhat moderate given its concentration in the semiconductor sector.
The structure of the Korean economy's heavy reliance on global semiconductor demand has been pointed out as a concern. KDI presented two contrasting scenarios. First, if global AI investment demand contracts or competition with semiconductor-producing countries intensifies, leading to a decline in the global market share of domestic semiconductor companies, economic growth could slow down rapidly.
Conversely, if AI investment demand remains high and domestic companies' semiconductor supply capabilities expand faster than expected, there is also a possibility that economic growth will exceed forecasts.
Uncertain external conditions are another variable. KDI warned that if U.S. tariff policies and geopolitical conflicts in the Middle East lead to disruptions in raw material supplies and rising production costs, the pace of economic improvement could be dampened.
Kim Yeon Gu (Director) stated, "The overall macroeconomic situation in our country has become more dependent on semiconductors than in the past, and the macroeconomic outlook itself can change significantly depending on semiconductor market conditions."
in ECONOMY
