The International Monetary Fund (IMF) has raised its forecast for South Korea's economic growth this year to 3.3%. This adjustment is based on expectations that strong semiconductor exports driven by artificial intelligence (AI) investments will outweigh the negative impacts of the ongoing conflict in the Middle East. The increase in South Korea's growth forecast surpasses both the global average and that of advanced economies.
In its October World Economic Outlook (WEO) released on the 13th, the IMF projected South Korea's real gross domestic product (GDP) growth rate at 3.3%, an increase of 0.7 percentage points from its July forecast. The growth forecast for next year was also raised from 2.5% to 2.8%, a 0.3 percentage point increase.
The IMF cited robust external demand for semiconductors as the primary reason for the upward revision. Despite the adverse effects of the Middle East conflict, demand for AI-related hardware is expected to support South Korea's economic growth. The country, along with Taiwan, has been identified as a key trading partner for AI hardware, with strong exports potentially benefiting raw material exporting countries and manufacturing hubs.
South Korea's growth forecast increase significantly exceeds the global average. The IMF has projected the global economy to grow by 3.1% this year, a 0.1 percentage point increase from its July estimate. The forecast for global economic growth next year remains unchanged at 3.4%. Among advanced economies, the growth forecast for this year has been raised to 2.1%, an increase of 0.4 percentage points, while the forecast for emerging and developing economies has been lowered to 3.7%, a decrease of 0.1 percentage points.
For major economies, the United States' growth forecast for this year remains at 2.3%, supported by technology investments and productivity improvements, with limited impacts expected from the war. The Eurozone's growth forecast has been raised to 1.1%, an increase of 0.2 percentage points, while Japan's forecast has been adjusted to 0.7%, up by 0.1 percentage points. However, growth is expected to slow compared to last year due to consumer sentiment being dampened by rising energy costs. China's growth forecast has been lowered to 4.5% due to the impact of rising international oil prices.
The global economy is expected to continue on a better-than-expected trajectory, supported by increased AI investment, despite the prolonged Middle East conflict and trade tensions. However, inflationary pressures from rising energy and food prices remain a concern. The IMF projects global inflation to rise by 4.7% this year, with advanced economies expected to see a 3.1% increase and emerging markets projected at 5.7%. Core inflation in major economies is expected to gradually converge to target levels after the end of 2027.
This forecast is based on the assumption that the Strait of Hormuz will reopen in March next year and that energy supply and logistics conditions will normalize to pre-war levels by October next year. The IMF noted that while downside risks from Middle East tensions and trade fragmentation remain prevalent, they have eased compared to July.
Key risk factors include volatility in commodity prices, inflationary pressures, a reassessment of productivity expectations related to AI, and the potential resurgence of trade disputes. Conversely, the prolonged investment cycle in AI technology and the restructuring of energy supply chains could boost growth prospects.
The IMF has recommended that countries secure fiscal capacity, pursue medium-term fiscal consolidation, and provide temporary and targeted support for vulnerable populations. It also urged prioritizing monetary policy for price stability and called for international cooperation to enhance labor mobility, streamline regulations, and restore mutually beneficial trade norms.
The South Korean government acknowledged the improved growth outlook due to strong semiconductor exports but warned that the prolonged Middle East conflict and rising prices and interest rates could continue to burden households. To address structural issues such as polarization and declining potential growth rates, the government plans to focus on three key social policies: housing, job creation, and support for low-income households, aiming to stabilize livelihoods, reduce polarization, and boost potential growth rates.
* This article has been translated by AI.
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