Korean economy forecast to grow 1.9% next year, but exports will slip 0.5 %: KIET

Containers are waiting to be shipped at a port in Pyeongtaek, Gyeonggi Province, Nov. 14. Yonhap

Korea's economy will likely grow 1.9 percent next year, led by a recovery in domestic consumption, while exports are expected to dip 0.5 percent after hitting an all-time high in 2025, a state-run think tank said Monday.

The Korea Institute for Industrial Economics & Trade (KIET) made the projection, saying that exports are expected to slightly decrease in 2026 due to a base effect and lingering global trade uncertainties, but domestic consumption will continue its upward momentum.

In 2025, Korea's yearly exports will likely surpass the $700 billion mark for the first time in history, marking a 2.5 percent increase from the previous year, mainly on strong demand for semiconductors sparked by an artificial intelligence (AI) boom, the KIET said in its annual report.

In the first 10 months of this year, exports grew 2.3 percent from a year earlier to $579.2 billion, the highest ever for the period, led by outbound shipments of semiconductors, automobiles, ships and biohealth products.

Next year, exports are expected to reach $697.1 billion, the report said, citing what it called a global economic and trade slowdown, as well as a base effect from a record-high figure expected this year.

The country's exports breached the $100 billion mark in 1995, the $200 billion mark in 2004 and $300 billion in 2006. They climbed again to over $400 billion in 2008 before breaching the $500 billion and $600 billion marks in 2011 and 2021.

In detail, chip exports will gain 4.7 percent on-year in 2026, led by continued demand for high-value products, such as high-bandwidth memory and DDR5, and biohealth exports will climb 7.8 percent.

But automobile, ship and machinery exports are expected to shed 0.6 percent, 4 percent and 3.7 percent, respectively, as they are highly affected by U.S. tariff policies, while petroleum and steel exports will sharply drop by 16.3 percent and 5 percent.

The KIET projected private consumption to increase 1.7 percent from a year earlier in 2026, thanks to government policy support and the stabilization of interest rates and prices.

Facility investment will rise 1.9 percent on improved liquidity of companies and heavy investment in advanced industries related to AI, while construction investment will go up 2.7 percent, according to the KIET.

The think tank's 1.9 percent growth forecast for Asia's fourth-largest economy is in line with separate projections made earlier by eight major global investment banks, including Barclays, Bank of America and Citi Group.

Earlier this month, the Korea Development Institute forecast the Korean economy to expand 1.8 percent in 2026.