BOK lifts 2026 growth forecast to 3.3% on chip exports; KDI says households still lagging

"The domestic economy is expected to see a significant increase in its growth rate this year, driven by strong semiconductor exports, and it will maintain steady growth next year as well," the Bank of Korea said in a report submitted to the National Assembly, according to Yonhap News Agency. "As the semiconductor sector continues to expand, the positive impact of improving income conditions is expected to spread to domestic demand as a whole, including consumer spending, leading to a favorable growth trend."

The bank said gross domestic income, which measures total income generated and costs incurred across the economy, grew 13.2 percent in the first quarter of this year and 15.7 percent in the second quarter, compared with 3.5 percent in the fourth quarter of 2025.

The Bank of Korea has already moved to tighten policy, raising its benchmark interest rate to 3 percent at two consecutive meetings in July and August, which it described as preemptive action to keep inflationary pressure from building. The bank said consumer prices are likely to stay above its 2 percent target as strong exports and investment support household incomes, and that core inflation, which strips out volatile energy and food prices, rose nearly 3 percent in recent months because of supply chain disruptions caused by the prolonged Middle East crisis.

"We plan to closely monitor inflation and economic trends, as well as financial stability, and determine the timing and pace of additional rate hikes," the bank said. Its next rate-setting meeting is scheduled for Oct. 22.

The Korea Development Institute, a state-run think tank, gave a more guarded account of the same recovery in its monthly economic assessment released Monday. It said the recovery led by the artificial intelligence industry has not yet reached households broadly, and that gains in household purchasing power remain limited.

"The recovery in household purchasing power remains constrained due to subdued underlying wage growth and elevated supply-side inflationary pressures, including those from persistently high oil prices," the KDI said. The two institutions' accounts of the recovery therefore differ on how far it has spread: the central bank expects semiconductor-led income gains to lift consumer spending economy-wide, while the KDI describes the benefits as concentrated and household demand as still weak.

The KDI said the economy nevertheless appears to be holding its recovery momentum, with manufacturing output continuing to grow at a solid pace. "Exports and equipment investment continue to grow strongly, led by AI-related sectors, as global demand for AI infrastructure investment remains robust," it said, adding that exports of steel products and nonferrous metals tied to AI infrastructure also remain firm.

The export figures bear that out. South Korea's exports jumped 83.5 percent in September from a year earlier to a record US$120.9 billion, driven by a surge in chip shipments, and semiconductor exports exceeded US$60 billion for the first time, the KDI said.

Separately, Bank of Korea Gov. Shin Hyun-song will travel to Bangkok this week for the Group of 20 finance ministers and central bank governors meeting, where participants will discuss global economic conditions, growth and global imbalances, the bank said. He will also attend the International Monetary Fund-World Bank Group meetings, which focus on the global economic outlook and financial stability, and hold separate talks with senior officials from the Federal Reserve, the European Central Bank and other major central banks. While in Bangkok he is scheduled to take part in CNN's Global Perspectives live event series alongside Ngozi Okonjo-Iweala, director-general of the World Trade Organization, and Bernard Mensah, president of International at Bank of America.

Editor's Summary

South Korea's central bank raised its growth forecasts to 3.3 percent for 2026 and 2.9 percent for 2027, citing a semiconductor export boom and its spillover into consumer spending, and held the door open to further rate increases after lifting its benchmark to 3 percent in July and August. The Korea Development Institute reported the same day that the AI-led recovery has yet to reach households broadly, with wage growth subdued and oil-driven supply pressures weighing on purchasing power. September exports rose 83.5 percent to a record US$120.9 billion, with semiconductor shipments topping US$60 billion for the first time.