The Bank of Korea raised its growth forecast for the South Korean economy this year to 3.3% from 2.6%. If the projection holds, the country would post growth above 3% for the first time in five years, since 2021. The size of the upward revision is also the largest in five years.
The central bank presented the 3.3% forecast for real gross domestic product growth in a revised economic outlook released on the 27th. The figure exceeds projections from the government (3.0%) and the Korea Development Institute (KDI, 3.2%), and marks the highest since 2021, when the economy grew 4.7%. It is also above the 3.2% average forecast of eight major investment banks as of the end of last month.
The 0.7 percentage point increase from the bank's May forecast, made just three months earlier, is the largest revision in five years, since May 2021, when the bank lifted its outlook by 1.0 percentage point to 4.0% from 3.0%.
The revision appears to reflect stronger-than-expected output driven by robust semiconductor exports. After growing 1.8% in the first quarter, GDP expanded 0.6% quarter-on-quarter in the second quarter, far exceeding the 0.2% forecast.
The central bank first issued its annual growth forecast for this year at 1.8% in November 2024, then cut it to 1.6% last May before raising it repeatedly — to 1.8% last November, 2.0% in February and 2.6% in June.
The bank also raised its growth forecast for next year to 2.9% from the 2.1% projected in May, an increase of 0.8 percentage point.
For next year, the bank first projected 1.9% growth last November, lowered it to 1.8% in February and has raised it since May. The revision appears to reflect a view that the semiconductor cycle will remain strong through next year and lift growth.
The bank maintained its consumer inflation forecasts at 2.7% for this year and 2.3% for next year.
