The Asian Development Bank raised South Korea's growth forecast to 2.6% from 1.9% on July 8 local time, citing stronger first-quarter results and government Middle East response measures. Next year's projection increased to 2.0% from 1.9%. The outlook matches forecasts from the Bank of Korea, IMF, and OECD at 2.6%. South Korea's Ministry of Economy and Finance attributed the upward revision to first-quarter economic performance exceeding expectations and the buffering effects of government policies addressing Middle East tensions.
ADB Report Details Growth Projection Increases
The ADB's Asia Development Outlook report raised Korea's current year growth forecast by 0.7 percentage points to 2.6%. Next year's forecast increased 0.1 percentage point to 2.0%. The revision places ADB's outlook in line with the Bank of Korea (2.6%), Korea Development Institute (2.5%), IMF (2.6%), and OECD (2.6%). June exports reached $102.2 billion, marking the first time the figure surpassed $100 billion according to data cited in the report.
The institution identified global artificial intelligence demand driving export expansion as a primary growth factor for 2026-2027. Semiconductor industry strength will offset downward pressure from rising energy costs and supply chain disruptions, according to the ADB assessment. Consumer spending is expected to remain stable supported by stock market gains, information technology company performance, and government support policies.
Regional Advanced Economy Forecasts Reflect Semiconductor Boom
ADB raised growth projections for other Asia-Pacific advanced economies alongside Korea. Taiwan's forecast increased 1.9 percentage points to 9.5%, Hong Kong's rose 0.4 percentage points to 3.0%, and Singapore's climbed 1.2 percentage points to 3.2%, all reflecting strong semiconductor sector performance. Japan's projection remained unchanged at 0.7%, Australia held at 2.0%, while New Zealand's forecast decreased 0.3 percentage points to 1.6%.
Inflation Projections Adjusted for Energy Price Impact
Korea's inflation rate is forecast at 2.7% for the current year and 2.2% for next year. Both figures increased from previous projections by 0.4 percentage points and 0.2 percentage points respectively, reflecting international energy price increases passing through to consumer prices. The adjustments account for production cost rises stemming from Middle East conflict-related energy market impacts.
Asia-Pacific Developing Economies Growth Outlook
ADB lowered its growth forecast for Asia-Pacific developing economies by 0.2 percentage points to 4.9% for the current year. The institution cited prolonged Middle East conflict effects including energy price increases, supply chain disruptions, rising production costs, and reduced economic activity. Next year's projection remained at 5.1% as conflict impacts are expected to diminish and downward pressure to ease. Inflation for developing economies is projected at 4.3% this year (up 0.7 percentage points) and 3.4% next year (unchanged).
The ADB identified potential downside risks including long-term energy supply disruptions, U.S. tariff reimposition, and stock market corrections.
FAQ
What did the Asian Development Bank announce about South Korea's economy on July 8?
The ADB raised South Korea's growth forecast to 2.6% from 1.9% for the current year and to 2.0% from 1.9% for next year, citing stronger first-quarter performance and government measures addressing Middle East conflict impacts.
Why did ADB increase Korea's economic growth projection?
The upward revision reflects first-quarter economic growth exceeding expectations and the buffering effects of government policies responding to Middle East tensions, according to Korea's Ministry of Economy and Finance explanation of the ADB report.
How does ADB's Korea forecast compare to other institutions?
ADB's 2.6% projection matches forecasts from the Bank of Korea (2.6%), IMF (2.6%), and OECD (2.6%), while the Korea Development Institute projects 2.5%, showing consensus among major economic institutions.
