The Asian Development Bank (ADB) raised its growth forecast for Korea this year to 2.6%. The bank judged that the semiconductor boom and the government's oil price countermeasures would offset downward pressure, even as energy prices climbed and supply chain concerns grew amid instability in the Middle East.
In a supplementary update to its Asian Development Outlook released on July 9, the ADB projected Korea's economic growth at 2.6% this year, up 0.7 percentage points from its April forecast. The bank also raised its growth forecast for next year by 0.1 percentage points, from 1.9% to 2.0%. The revision reflects stronger-than-expected first-quarter growth and the cushioning effect of government measures responding to the Middle East conflict, according to the analysis.
The ADB identified export expansion driven by rising global artificial intelligence (AI) demand as the key engine of Korea's economic growth this year and next. Even if higher energy prices raise production costs and disrupt supply chains, the semiconductor upturn is expected to offset such downward pressure, the bank projected.
Consumption is also expected to remain stable, supported by a rising stock market, strong earnings at IT companies and government support policies. However, the bank cited prolonged energy supply disruptions, the reimposition of U.S. tariffs and the possibility of a stock market correction as potential risks.
Among countries classified alongside Korea as advanced Asia-Pacific (AAP) economies, the semiconductor tailwind was evident. Taiwan's forecast was raised to 9.5% (up 1.9 percentage points from April), Hong Kong's to 3.0% (up 0.4 percentage points) and Singapore's to 3.2% (up 1.2 percentage points). By contrast, the April forecasts for Japan (0.7%) and Australia (2.0%) were unchanged, while New Zealand's was lowered by 0.3 percentage points to 1.6%.
Inflation forecasts, on the other hand, fully reflected the impact of rising energy prices. The ADB raised its consumer price inflation forecast for Korea to 2.7% this year (up 0.4 percentage points) and 2.2% next year (up 0.2 percentage points).
The developing Asia-Pacific (DAP) group showed a contrasting trend to the advanced group that includes Korea. The ADB cut its growth forecast for the region this year by 0.2 percentage points to 4.9%. Rising energy prices from the Middle East conflict and prolonged supply chain disruptions led to higher production costs and weaker economic activity, the bank explained.
However, expecting the impact of the Middle East conflict to gradually diminish, the ADB kept its growth forecast for the region next year at 5.1%, unchanged from April. The bank projected inflation in the developing group to rise to 4.3% this year (up 0.7 percentage points) on the back of higher energy and raw material prices, while maintaining its April forecast of 3.4% for next year.
The ADB's upward revision aligns with recent moves by major institutions at home and abroad. The International Monetary Fund (IMF), in its July World Economic Outlook update released on July 8, also projected Korea's growth this year at 2.6%, up 0.7 percentage points from April — the largest upward revision among the 30 countries covered, the fund said.
Earlier, in May, the Bank of Korea (2.0% → 2.6%) and the Korea Development Institute (KDI, 1.9% → 2.5%) sharply raised their growth forecasts, followed by the Organisation for Economic Co-operation and Development (OECD, 1.7% → 2.6%) last month.
