May 28, 2026 raised its economic growth forecast for the year to 2.6 percent from the previous 2.0 percent projection, attributing the upgrade to robust semiconductor exports fueled by global artificial intelligence demand. The central bank held its policy rate steady at 2.50 percent and revised its consumer inflation outlook to 2.7 percent. First-quarter gross domestic product expanded 1.7 percent quarter-on-quarter, nearly double the earlier forecast of 0.9 percent.
According to the Bank of Korea’s Economic Outlook report released Thursday, the semiconductor supercycle is likely to persist due to sustained demand for high-bandwidth memory chips and AI servers. The 0.6 percentage point upward revision ranks among the largest in five years. Bank of Korea Governor Shin Hyun-song estimated that the semiconductor cycle and IT export expansion would alone lift growth by 0.7 percentage points.
The central bank noted that strong earnings in the chip sector would probably boost corporate tax revenue and support the broader economy. It identified the Middle East conflict as a key downside risk that could reduce growth by up to 0.4 percentage points through supply shocks and shipping disruptions. Normalization of traffic through the Strait of Hormuz was singled out as an important variable for both growth and inflation outlooks.
In the report the Bank of Korea said government measures including a supplementary budget have partially offset some of the negative effects from regional tensions. Solid exports particularly in the information technology sector have driven the improved projections. The stronger than anticipated first quarter has provided additional momentum for the full year outlook.
An optimistic scenario in the central bank’s assessment indicated that growth could reach the 3 percent range if semiconductor performance exceeds current expectations. This would mark the strongest annual expansion in four years. The Bank of Korea will monitor external uncertainties closely while maintaining its current monetary policy stance.
The revision reflects the export oriented nature of the South Korean economy and the extended nature of the current chip cycle compared with previous periods. Public data from the central bank underscores the outsized role of semiconductors in recent quarterly results. Officials continue to evaluate how prolonged AI driven investment will shape the remainder of 2026.
