Korea should not sacrifice AI boom over chip dependence fears: IDB economist
Laura Alfaro, chief economist and economic counselor at the Inter-American Development Bank, speaks during a press conference at the Four Seasons Hotel Seoul, Tuesday. Courtesy of Korea Development Institute
'Korea should save during chip booms, stay flexible in downturns'
Korea should capitalize on the artificial intelligence (AI)-driven semiconductor boom rather than curb growth over concerns about its heavy reliance on chips, while building economic resilience through stabilization funds and greater structural flexibility, according to the chief economist of the Inter-American Development Bank (IDB), Tuesday.
"I wouldn't kill the goose that lays the golden egg. It's weird to kill AI just because it's volatile. Let's find ways to adjust," Laura Alfaro, chief economist and economic counselor of the IDB, said during a press conference.
"Right now, the game is AI, and Korea is growing faster than other countries. It happened because for many years you have built the production and infrastructure."
Alfaro drew parallels between Korea's dependence on semiconductors and the "resource curse" in Latin America, where economies heavily reliant on natural resources are vulnerable to fluctuations in commodity prices. The region is rich in minerals and oil, whose prices can fluctuate sharply, much like those of semiconductors.
To manage such cycles, Alfaro recommended establishing a stabilization fund that would allow the government to set aside some of the windfall gains during boom periods to cushion the economy during downturns. Such a fund could also help prevent excessive appreciation of the domestic currency and mitigate the effects of large, rapid capital inflows.
She expressed support for the rationale behind the Korean government's proposed Future Response Fund, while acknowledging that she was not familiar with its details.
Asked whether the government should prioritize paying down national debt over accumulating assets in the fund, Alfaro said neither approach was necessarily superior, as both represent forms of saving.
She also stressed the need for greater flexibility in labor markets and government spending. The problem during boom-and-bust cycles is not just excessive consumption or spending during good times, but also the inability to adjust during downturns, she said.
Alfaro said she is "AI positive," adding that concerns about volatility should not deter investment in the technology.
"It's interesting that there is a lot concern about the high volatile growth (in Korea), but you're getting the high growth," she said. "We are parts of the world that we are not having more kids ... We have to grow through productivity, and I do think AI gives us that hope."
Alfaro was participating in the Global Financial Stability Conference 2026, hosted by the Ministry of Finance and Economy and the Korea Development Institute.