IMF lifts South Korea growth outlook

The International Monetary Fund (IMF) raised its forecast for South Korea's economic growth this year to 2.6%, citing resilient semiconductor and artificial intelligence (AI) hardware exports that have outweighed higher energy costs stemming from the conflict in the Middle East. The revised estimate is 0.7 percentage point higher than the IMF's April projection.

In its July update to the World Economic Outlook released Wednesday (local time), the IMF projected South Korea's economy would expand 2.6% this year, up from the 1.9% forecast issued in April. Among the 30 major economies covered in the update, South Korea received the largest upward revision. The IMF also raised its 2027 growth forecast to 2.5% from 2.1%.

The IMF identified South Korea, Taiwan, Thailand and Malaysia as the world's four largest net exporters of AI hardware. Although South Korea remains exposed to rising energy costs because of its dependence on Middle Eastern energy imports, the fund said robust semiconductor and AI hardware exports have more than compensated for those pressures. It also cited the country's stronger-than-expected first-quarter performance, with annualized growth reaching 7.5%, well above the 1.8% pace projected in April.

The IMF lowered its global growth forecast for this year to 3.0%, a 0.1 percentage point reduction from April. It cut its forecasts for the eurozone to 0.9% and Japan to 0.6%, citing the continued burden of elevated energy prices caused by the Middle East conflict. China's growth forecast was raised by 0.2 percentage point to 4.6%, supported by strong exports and advanced manufacturing, although the IMF said weak domestic demand and structural headwinds continue to weigh on the economy. It left its U.S. growth forecast unchanged at 2.3%.

The IMF also raised its global inflation forecast for this year to 4.7%, up 0.3 percentage point, reflecting higher energy and food prices. The projection assumes shipping disruptions in the Strait of Hormuz will begin to ease later this month and that energy supplies and global logistics will return to pre-conflict conditions around March next year.

The Asian Development Bank (ADB) also upgraded its forecast for South Korea's economic growth this year to 2.6% in its latest Asian Development Outlook released Wednesday, up from 1.9% in April. It also raised its forecast for South Korea's consumer inflation this year to 2.7% from 2.3%.


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