Key facts
- South Korea's central bank is expected to raise interest rates on July 16.
- The country's 2026 economic growth forecast was raised to 3.0%, the highest in five years.
- The government plans to fast-track investments in semiconductors, AI data centers, and physical AI.
- Budget spending is set to increase by at least 10% by 2027, prioritizing mega projects.
- Inflation was forecast at 2.6% for 2026, up from the previous forecast of 2.1%.
South Korea's finance ministry has projected the country's economic growth to reach 3.0% in 2026, marking a five-year high, driven by a global semiconductor and artificial intelligence boom. The ministry also aims to lift the economy's potential growth rate to 3% from below 2% and plans to increase 2027 budget spending by at least 10% to over 800 trillion won ($532.73 billion), prioritizing semiconductor, AI data center, and physical AI investments.
This optimistic outlook follows a first-quarter economic growth that was the strongest in nearly six years, largely due to booming chip exports amid surging global AI investment. The government has set ambitious targets, including becoming one of the world's four largest exporters and raising gross national income per capita to $50,000 from an expected $40,000 this year.
To counter persistent high inflation, a weak currency, and elevated bond yields, the ministry pledged measures such as fuel price caps and extended foreign-exchange regulatory easing. Inflation is forecast at 2.6% for 2026, an increase from the previous forecast, attributed partly to high oil prices. The central bank, the Bank of Korea, is also expected to raise interest rates on July 16 for the first time in over three years.