The International Monetary Fund (IMF) has raised its economic growth forecast for South Korea to 3.3% this year, driven by strong semiconductor performance. While semiconductor exports account for nearly half of total exports and corporate tax revenues are rebounding due to improved corporate performance, the broader economic impact on other industries remains limited. Concerns are growing that an over-reliance on semiconductors could increase economic volatility.
According to the Ministry of Economy and Finance, the IMF presented its 'October World Economic Outlook' on October 13, adjusting South Korea's growth forecast from 2.6% in July to 3.3%, an increase of 0.7 percentage points. The IMF anticipates that strong external demand for semiconductors will offset the negative impacts of global conflicts, supporting South Korea's growth trajectory. The growth forecast for next year has also been revised upward from 2.5% to 2.8%.
However, a significant portion of this growth is concentrated in a specific industry. While an improvement in the semiconductor sector can lead to rapid increases in exports and growth rates, a decline in global demand or falling prices could adversely affect the entire economy.
In fact, the share of semiconductors in exports is growing. According to the Ministry of Trade, Industry and Energy, semiconductor exports reached $60.3 billion last month, a 262.8% increase compared to the same month last year. This accounts for 49.9% of total exports, which amounted to $120.94 billion. For the first time, semiconductor exports exceeded $60 billion in a single month. Although exports of other items also increased by 23%, they did not match the growth rate of semiconductors.
Corporate tax revenues are also benefiting from improved corporate performance. The National Assembly Budget Office reports that corporate tax revenues are expected to rise from 62.5 trillion won in 2024 to 84.6 trillion won in 2025, a 35.3% increase. Projections suggest that corporate tax revenues will continue to grow in 2026, driven by improved corporate performance in the semiconductor sector.
Another challenge is the relatively small employment impact of this growth. The Bank of Korea's 2024 input-output table indicates that the employment multiplier for the computer, electronic, and optical equipment industry, which includes semiconductors, has decreased from 3.6 jobs in 2023 to 2.9 jobs in 2024. This means that the number of jobs created, both directly and indirectly, per 1 billion won in final demand has declined. The semiconductor industry, characterized by large-scale facilities and advanced technology, tends to have high productivity, making it difficult for increases in production value to translate directly into job growth.
While the semiconductor boom is driving improvements in exports and tax revenues, there are concerns about its limited effects on employment and domestic demand. As the impact of fluctuations in the semiconductor market on the overall economy grows, analysts emphasize the need to maintain competitiveness in other key industries and reduce growth disparities across sectors.
Kim Mi-ru, a researcher at the Korea Development Institute, stated, "Our economy is heavily dependent on global semiconductor demand, which raises the possibility that changes in the semiconductor market could increase overall macroeconomic volatility. In particular, if concerns about the profitability of AI investments lead to a decline in global AI investment demand or if competition with other semiconductor-producing countries intensifies, domestic semiconductor companies could see their global market share decrease, potentially leading to a rapid slowdown in growth."
* This article has been translated by AI.
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