BOK lifts 2026 growth forecast from 1.8% to 2% on strong chip exports

Bank of Korea (BOK) headquarters in Seoul / Courtesy of BOK

The Bank of Korea (BOK) raised its 2026 growth forecast from 1.8 percent to 2 percent on Thursday, buoyed by an unexpectedly strong outlook for semiconductor exports.

It held the key rate steady at 2.5 percent in a sixth consecutive freeze.

BOK Gov. Rhee Chang-yong said the upward revision from 1.8 percent, projected in November of last year, reflects the economy’s increasing reliance on chips and select IT manufacturing sectors amid an extended downturn in construction and other non-IT sectors.

He added that the recent strengthening of the Korean currency against the U.S. dollar to the 1,420-won range is “not yet a level where we can feel complacent.”

"Domestic factors that had previously driven expectations of the won weakening past 1,500 per dollar have eased," Rhee said during a press conference at the bank headquarters in Seoul.

However, overseas variables, including volatility in U.S. AI stocks, the recent U.S. Supreme Court ruling on tariffs and Japan’s fiscal policy, remain factors to be closely monitored, he said. “Many companies are selling U.S. dollars they have kept for months, helping to lower the won-dollar rate. The recently revised National Pension Service investment portfolio that factored in currency implications also helped.”

The governor then said the main factor in the revision was faster-than-projected growth in the country’s exports and capital spending, underpinned by a favorable semiconductor cycle and steady global economic growth,”

The rosy outlook is powered further by improved corporate earnings supporting consumption, but is significantly offset by a slowdown in construction investment.

In 2025, semiconductor-driven IT manufacturing lifted the country’s economic growth by 0.6 percentage points. This year, it is expected to raise the growth forecast by another 0.7 percentage points.

Bank of Korea Gov. Rhee Chang-yong speaks during a press conference at the bank headquarters in Seoul, Thursday. Yonhap

Still, he added, the Korean economy will grapple with widening polarization.

The three factors are IT-centered growth, rising stock prices and rapid advances in artificial intelligence (AI) technologies.

“Korea’s IT is leading growth, while non-IT growth remains far below potential. Also, stock investment gains benefit higher-income households and institutional investors, compared to their lower-income peers. As for the AI sectors, the technological advances are much faster than expected, leaving many young generations with dimming job prospects,” the governor said.

He reiterated that monetary policy alone cannot be the solution to reducing inequality. “We have published many papers and suggested medium- to long-term structural reforms. It is difficult to mitigate inequality with interest rate policy alone.”

The recent cooling in the housing market and downtick in housing prices are favorable developments, Rhee added, but more time is needed to characterize it as a sustained stabilization.

“It is too early to say that housing prices in the Seoul metropolitan area are on a clear path toward stabilization. Although recent government measures have helped slow price increases, household debt has grown to a level that could threaten financial stability. We need to reduce household and mortgage lending,” he said.

He called for housing supply measures, tax reform and broader efforts to advance the de-Seoulization drive, the only method he views as a viable step to significantly reducing Seoul housing prices. “If the Seoul-centric growth model persists, housing prices in the capital area will not go down.”