The Bank of Korea has revised its economic growth forecast for this year from 2.6% to 3.3%, marking the highest adjustment in five years since 2021's 4.7%. The increase is attributed to strong semiconductor exports.
In its economic outlook released on August 27, the Bank projected a real GDP growth rate of 3.3%, surpassing the government's estimate of 3.0%.
This marks a 0.7 percentage point increase from the forecast made in May, representing the largest adjustment since May 2021, when the estimate was raised from 3.0% to 4.0%.
Despite ongoing uncertainties from the conflict in the Middle East, analysts expect robust growth driven by a semiconductor boom and its ripple effects. Contributing factors include a 0.35 percentage point boost from the semiconductor sector, a 0.1 percentage point increase from accelerated investments in three major projects, and a 0.1 percentage point impact from a smaller-than-expected influence from the Middle East.
Lee Dong-ryul, head of the Bank's Economic Research Department, stated, "The semiconductor industry's better-than-expected performance accounts for a significant portion of the 0.7 percentage point upward adjustment from the May forecast. Both volume and price factors contributed, with price having a greater impact."
The Bank forecasts a 9.7% increase in merchandise exports this year, doubling the previous estimate of 4.9% made in May. The growth rate for facility investment is projected at 6.8%, significantly higher than the May forecast of 4.4%, while private consumption is expected to rise from 2.0% to 2.1%. Conversely, construction investment has been lowered from 0.6% to 0.2%.
After a substantial 1.8% growth in GDP in the first quarter, the second quarter saw a 0.6% increase. The Bank anticipates continued strong performance in exports and investments, particularly in the IT sector, with consumer spending showing a healthy recovery. As a result, the third quarter is expected to see a slight slowdown to 0.3% growth due to base effects from previous high growth, while the fourth quarter is projected to maintain a solid growth rate of 0.5%.
Reflecting the surge in semiconductor exports, the Bank has significantly raised its current account surplus forecast for this year to $450 billion, up from the May estimate of $250 billion. This figure is more than four times last year's record surplus of $123.1 billion.
The Bank also predicts an increase of 140,000 jobs this year, a decrease from the previous estimate of 180,000 due to the impact of the Middle East conflict and sluggishness in vulnerable sectors like construction.
Looking ahead, the Bank has adjusted its growth forecast for next year from 2.1% to 2.9%. Lee noted, "This forecast assumes that the semiconductor industry's expansion will continue into next year, with supply shortages expected to persist until the first half of next year."
As the semiconductor sector continues to thrive, its effects are expected to spread to other sectors, leading to robust domestic and export performance. Lee explained, "The share of the IT manufacturing sector has increased from 9% last year to 16.4% in the first quarter of this year, indicating a restructuring of the economy. As the IT sector's share grows, the contribution to overall economic growth from the same growth rate could be about twice as high as in the past."
However, there are growing concerns regarding the slowdown in AI investment by big tech companies, which could impact the semiconductor market. In an optimistic scenario analyzed by the Bank, if the growth in semiconductor exports expands further, export volumes could increase to the mid-20% range, maintaining a high level in the mid-10% range next year, potentially raising domestic growth rates by 0.2 percentage points this year and 0.6 percentage points next year. In this case, inflation is expected to rise by 0.2 percentage points next year compared to this year.
Conversely, in a pessimistic scenario where semiconductor export growth slows to the mid-10% range this year, growth rates could decrease by 0.1 percentage points this year and 0.4 percentage points next year.
The Bank anticipates that the ripple effects of the semiconductor boom will become more pronounced next year. Lee stated, "Next year, we expect a significant increase in performance bonuses for semiconductor companies, leading to greater employment effects. As consumption spreads across various sectors, the impact of the semiconductor market is expected to grow even larger."
* This article has been translated by AI.
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