The Bank of Korea increased its economic growth projection for this year, raising it from 2% to 2.6%, according to its updated economic forecast released on the 28th.
Boosted by robust semiconductor exports, the initial GDP growth rate for the first quarter of this year, released last month, reached 1.7% from the prior quarter, much higher than the earlier projection of 0.9%, resulting in an upward revision of the annual growth forecast.
This updated projection reflects the Bank of Korea’s evaluation of the semiconductor upswing fueled by the surge in AI investments. It exceeds the predictions from the Korea Development Institute, KDI, at 2.5%, the International Monetary Fund, IMF, at 1.9%, and the Organisation for Economic Co-operation and Development, OECD, at 1.7%.
The Bank of Korea has increased its growth projection for this year, moving from 1.6% (as of August last year) → 1.8% (November last year) → 2% (February this year) → 2.6% (May this year). The Bank of Korea issues economic forecasts in February, May, August, and November.
Previously, several leading international investment banks also revised their growth projections for South Korea this year upwards, with JP Morgan raising its estimate from 2.2% to 3%, Citi from 2.2% to 2.9%, Barclays from 2% to 2.4%, and Nomura from 2.3% to 2.4%.
The Bank of Korea also increased its projection for consumer price inflation this year, moving it from 2.2% to 2.7% on the same day. The earlier economic forecast was published on February 26th, two days prior to the start of the Middle East conflict. This change is seen as indicating the effect of elevated oil prices exerting upward pressure on inflation.
The projected inflation rate for this year has increased from 1.9% (as of August last year) → 2.1% (November last year) → 2.2% (February this year) → 2.7% (May this year).
On the same day, the Bank of Korea forecasted a 2.1% economic growth rate for next year and a 2.3% rise in consumer prices.
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