The Asian Development Bank sharply raised its economic growth forecast for South Korea this year to 3.2%, saying rising exports driven by global demand for artificial intelligence chips and expansionary fiscal policy would underpin the expansion.
The ADB projected South Korea's gross domestic product growth at 3.2% in its Asian Development Outlook released on the 23rd.
The figure is 0.6 percentage points higher than the 2.6% it forecast in July, and 1.3 percentage points above the 1.9% it projected in April. The ADB has now raised its growth forecast for South Korea twice since April.
Major domestic institutions have also recently projected growth above 3% for the Korean economy this year. The Bank of Korea forecast 3.3%, while the Korea Development Institute projected 3.2%.
The ADB said its revision reflected solid manufacturing indicators in July and August, including the manufacturing purchasing managers' index and the business survey index.
It also cited rising exports on the back of expanding global demand for AI chips, expansionary fiscal policy, and a gradual recovery in private consumption supported by strong corporate earnings.
The bank flagged heightened geopolitical tensions, greater volatility in global financial markets and the risk that further U.S. tariff increases could dampen exports and investment as the main downside risks.
For next year, the ADB put South Korea's growth at 2.3%, up 0.3 percentage points from its July forecast of 2.0% and 0.4 percentage points from its April forecast of 1.9%.
The inflation forecast for South Korea this year was left unchanged at 2.7%. The bank said upward price pressure would persist because of higher international energy prices and firm domestic demand, but that government price-stabilization measures would offset part of that pressure.
Next year's inflation forecast was also kept at 2.2%, on the view that energy price pressure will ease and the effects of tighter monetary policy will come through.
The ADB raised its growth forecast for developing economies in Asia and the Pacific this year to 5.0%, up 0.1 percentage point from July, reflecting stronger private investment, government stimulus measures and robust exports from AI-related industries.
Next year's growth forecast for the region was kept unchanged at 5.1%.
Inflation in developing Asia and the Pacific was projected at 4.2% this year and 3.5% next year. This year's figure was cut by 0.1 percentage point to reflect slowing demand after price-stabilization steps in China and South Asian countries, while next year's was raised by 0.1 percentage point in light of the possibility of a prolonged El Nino.
