IMF raises Korea's 2026 growth forecast to 3.3 percent on AI chip boom

The International Monetary Fund (IMF) has raised its forecast for Korea's economic growth this year to 3.3 percent, up 0.7 percentage points from three months ago, in its outlook issued on Tuesday.

The revision factored in “strong external demand for semiconductors, which supersedes the negative impact of the [Iran] war.” The fund had previously forecast growth of 2.6 percent for Korea in July.

Its upward revision for Korea was much larger than the average increases of 0.1 percentage points worldwide and 0.4 percentage points among advanced economies. The fund also lifted its outlook for Korea's economy in 2027 by 0.3 percentage points to 2.8 percent.

Strong exports, led by semiconductors, have fueled a substantial upgrade to Korea's economic outlook after growth slowed to just 1.1 percent last year. The fund attributed its growth outlook to robust overseas demand for semiconductors, which is expected to more than offset the economic fallout from the war.

The IMF identified Korea and Taiwan as major players in the global AI hardware trade, whose economic impact could ripple through commodity-exporting countries and manufacturing hubs.

“In the upstream, only a few economies produce advanced semiconductors at scale, with Taiwan Province of China and Korea sourcing 62 percent of the net trade in computing hardware related to AI,” the report said, using the IMF's country designation for Taiwan. “Given the structure of supply chains for technology exports from these two economies, a handful of commodity exporters and other manufacturing hubs in East Asia are likely to see spillovers from this activity.”

The organization also nudged up its global growth forecast to 3.1 percent this year from the 3.0 percent it projected in July.

The fund sees the global economy holding up better than expected as investment in AI accelerates, despite economic pressures from the prolonged Iran war and trade disputes. It maintained its forecast for global growth next year at 3.4 percent.

Growth prospects varied across economies. The IMF raised its forecast for advanced economies this year to 2.1 percent from 1.7 percent.

The U.S. growth outlook held steady at 2.3 percent. “[The U.S.] activity is supported by robust private consumption, fiscal policy, accommodative financial conditions, and continued technology-related business investment […] and productivity strength,” the fund said. “It noted that the country is subject to the “only limited direct impact from the war given the country’s net energy exporter status.”

The fund also lifted its outlook for the eurozone from 0.9 percent to 1.1 percent and for Japan from 0.6 percent to 0.7 percent.

By contrast, the IMF lowered its growth forecast for emerging market and developing economies to 3.7 percent from 3.8 percent.

“China’s 2026 growth is projected to slow to 4.5 percent, as higher global oil prices, together with protracted uncertainty and structural headwinds, are expected to weigh on activity,” the fund said.

Prolonged disruptions to energy exports are expected to push the Middle East and Central Asia into a 0.3 percent economic contraction this year.

The IMF said downside risks continue to loom over the global economic outlook. The fund identified commodity price swings and inflationary pressures tied to the protracted war, as well as a possible resurgence of trade tensions, as major sources of uncertainty.

The IMF also flagged the risk that expectations for productivity gains from rising AI investment could be reassessed. It kept its global inflation forecast for this year unchanged at 4.7 percent, with inflation projected at 3.1 percent in advanced economies and 5.7 percent in emerging markets.

The IMF urged governments to build fiscal buffers against external shocks and strengthen public finances over the medium term. It called for temporary, targeted support for vulnerable groups and monetary policies that prioritize price stability. The fund also pressed countries to pursue structural reforms, including greater labor mobility and more efficient regulation and to strengthen international cooperation to restore mutually beneficial trade rules.

 BY NAM SOO-HYOUN [[email protected]]