Korea eyes 3% growth in 2026 riding on AI chip boom

President Lee Jae Myung speaks during a Cabinet meeting at Cheong Wa Dae in Seoul, Tuesday. Joint Press Corps

The government on Tuesday raised Korea's real gross domestic product (GDP) growth forecast for 2026 to 3 percent, up from the January projection of 2 percent, citing robust semiconductor exports driven by strong global demand for artificial intelligence (AI) chips.

To keep the growth momentum going, it plans to focus on developing semiconductor-centered industries and creating relevant jobs for young people.

The revised forecast was unveiled as the government announced its economic strategy for the second half of the year.

"The economy is expected to grow 3 percent this year as strong AI-driven demand for semiconductors continues to support exports, while downside risks stemming from the Middle East conflict will be cushioned by the supplementary budget and other policy measures," the Ministry of Finance and Economy said.

The government's projection is more optimistic than those of major international organizations.

Earlier this month, both the OECD and the International Monetary Fund released their forecasts that Korea's economy would expand by 2.6 percent this year.

The ministry also projected nominal GDP growth at 12.3 percent, the fastest pace since 1996, driven by improved trade conditions from the chip export boom. Consumer inflation is forecast to average 2.6 percent this year amid continued volatility in global oil prices linked to the Middle East conflict.

Speaking at a Cabinet meeting, President Lee Jae Myung called on ministries to seize the opportunities created by the AI-driven transformation of the global economy.

"The achievements we make in the second half of this year will determine the direction of Korea's next 30 years," Lee said.

The president set out goals of raising Korea's potential growth rate to 3 percent, becoming the world's fourth-largest trading nation and increasing per capita income to $50,000.

According to the OECD, Korea's potential growth rate fell to 1.85 percent in 2025 from 2.45 percent a year earlier and is projected to decline further to 1.66 percent this year.

"We need to accelerate the economic drive in the latter half of this year," Lee said.

Later in the day, Finance Minister Koo Yun-cheol outlined the government's economic strategy for the remainder of the year, aimed at sustaining the semiconductor-led recovery while strengthening Korea's long-term growth potential.

"Whether the current semiconductor boom ends as a temporary success or becomes a lasting turning point for the Korean economy depends on the choices we make today," Koo said during a briefing.

"We must reverse the decline in Korea's potential growth rate and address widening structural imbalances between exports and domestic demand, the IT and non-IT sectors, and the capital region and other parts of the country," he added.

Workers walk through Samsung Electronics' semiconductor plant in Pyeongtaek, Gyeonggi Province. Courtesy of Samsung Electronics

To support those goals, the government plans to establish a new fund to channel windfall corporate tax revenue generated by the semiconductor boom into long-term investment in youth development, regional growth and future industries.

The strategy also includes three flagship projects aimed at developing advanced industries centered on semiconductors, physical AI and AI data centers across the country's southwestern and central regions in the Jeolla and Chungcheong provinces, with major investments planned by Samsung Electronics and SK hynix.

In addition, the government aims to create more than 200,000 jobs for young people by 2030, including 100,000 private-sector positions in emerging industries such as science and technology, as well as 100,000 public-sector jobs linked to strategic industries.

The government also said it would foster new growth engines, including blockchain and other emerging industries, while pursuing regulatory reforms to support sustainable long-term growth.