The latest forecast is up 0.6 percentage point from the Manila-based bank's July projection of 2.6 percent, marking a second consecutive upward revision after the estimate was raised from 1.9 percent in April.
It is also the ADB's highest forecast for South Korea since 2021, when its September outlook projected 4.0 percent growth. ADB forecasts for South Korea from 2022 through 2025 did not exceed 3.0 percent.
The revised forecast reflects stronger-than-expected manufacturing activity in July and August including firm purchasing managers' and business sentiment indicators.
Exports have also benefited from growing global demand for artificial intelligence (AI)-related semiconductor chips, while expansionary fiscal policy and robust corporate earnings are expected to support a gradual recovery in private consumption.
The stronger outlook extends a sharp turnaround from earlier this year, when the ADB expected South Korea to grow just 1.9 percent amid uncertainty over energy prices, trade conditions and domestic demand.
The ADB also raised its 2027 growth forecast for South Korea to 2.3 percent from 2.0 percent in July.
Downside risks remain concentrated overseas. Heightened geopolitical tensions, greater volatility in global financial markets and the possibility of additional U.S. tariff increases could weaken South Korean exports and investment, according to the ADB.
But the ADB left its 2026 inflation forecast unchanged at 2.7 percent despite the stronger growth outlook.
Higher global energy prices and stronger domestic demand are expected to keep inflationary pressure elevated, although government measures to stabilize prices could partly offset the impact.
Inflation is projected to slow to 2.2 percent in 2027 as energy-price pressures ease and the effects of tighter monetary policy work through the economy.
The upgrade puts the ADB's growth estimate close to other recent forecasts that have been revised higher as South Korea's semiconductor-led expansion proved stronger than expected.
The forecast comes after the Bank of Korea (BOK) raised its growth forecast for this year to 3.3 percent in August, while the government expects the economy to expand 3.0 percent this year.
The ADB also nudged up its growth forecast for developing Asia and the Pacific to 5.0 percent from 4.9 percent, while keeping its 2027 estimate at 5.1 percent.
AJP Takeaways
- The Asian Development Bank raised South Korea's 2026 growth forecast to 3.2 percent from 2.6 percent, its second consecutive upgrade as AI-related semiconductor exports remain strong.
- The 3.2 percent projection is the ADB's highest current-year growth forecast for South Korea since 2021, when it projected 4.0 percent growth.
- The ADB raised South Korea's 2027 growth forecast to 2.3 percent but kept its 2026 inflation outlook at 2.7 percent amid lingering energy and geopolitical risks.
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