Foreign investment banks and international financial organizations are raising their forecasts for South Korea's economic growth, increasing the likelihood that the Bank of Korea will also revise its growth outlook upward this year. Expectations are growing that the semiconductor boom, driven by increased investment in artificial intelligence (AI), will last longer than previously anticipated.
According to the International Financial Center on July 13, the average forecast for South Korea's real GDP growth from major foreign investment banks at the end of last month was 3.0%. This marks the first time the average growth forecast from foreign investment banks has reached the 3% range. JP Morgan provided the highest growth forecast at 3.7%, while Citibank raised its estimate by 0.5 percentage points to 3.5%, also predicting growth in the 3% range.
International financial organizations have also increased their forecasts. The International Monetary Fund (IMF) raised its growth forecast for South Korea from 1.9% to 2.6%, marking the largest increase among advanced economies. The Asian Development Bank (ADB) also projected a growth rate of 2.6%, an increase of 0.7 percentage points, and the Organization for Economic Cooperation and Development (OECD) made a similar forecast.
The background for these upward revisions is the semiconductor boom. Strong demand for high-performance semiconductors, driven by AI investment, is boosting export growth and raising expectations for South Korea's economic growth. The Bank of Korea noted that the pace of semiconductor demand growth is outpacing supply due to AI investments, indicating a different pattern from the cyclical semiconductor cycles of the past.
In particular, advanced semiconductors like high-bandwidth memory (HBM) face ongoing supply constraints due to high processing difficulties, suggesting that the expansion phase driven by supply-demand imbalances will continue at least until the first half of next year. Supply shortages are expected to persist until new factories from SK Hynix and Micron begin operations next year.
The semiconductor boom is also leading to improvements in exports and the current account balance. As of May this year, the cumulative current account surplus reached $141.28 billion, more than four times the $33.9 billion recorded during the same period last year. In May alone, the current account recorded a surplus of $38.61 billion, setting a new monthly record. Furthermore, the Bank of Korea anticipates that the current account surplus for June will be around $40 billion.
This trend is likely to be reflected in the Bank of Korea's growth forecast. In its revised economic outlook in May, the Bank of Korea significantly raised its growth forecast for this year from 2.0% to 2.6%. Bank of Korea Governor Rhee Chang-yong indicated in a recent report to the National Assembly that there is upward pressure on the growth forecast (2.6%), suggesting the possibility of further increases. The Bank of Korea is expected to present its revised economic outlook in August.
Shin Young-koo, a researcher at Shinhan Investment Corp., stated, "The Bank of Korea is expected to raise the base rate by 25 basis points at the July Monetary Policy Committee meeting and further adjust the growth forecast upward in the August revision."
* This article has been translated by AI.
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