The Kospi and Kosdaq indexes are displayed on a board at the dealing room of Hana Bank's headquarters in Jung-gu, Seoul, on Tuesday. [Yonhap]
The Kospi and Kosdaq indexes are displayed on a board at the dealing room of Hana Bank's headquarters in Jung-gu, Seoul, on Tuesday. [Yonhap]

Citibank Korea has raised its GDP growth forecast for South Korea this year to 3.5 percent from 3.1 percent.

Kim Jin-wook, an economist at Citibank Korea, outlined the revised outlook in a report released Tuesday.

The upgrade reflects strong semiconductor performance, the government's three major mega-projects and a second supplementary budget.

"We factored in stronger-than-expected economic indicators in April and May, infrastructure investment tied to technology capital expenditure plans, and the possibility of a supplementary budget of more than 25 trillion won ($16.2 billion) being drawn up by early September," Kim said.

The previous day, the government and companies including Samsung Electronics and SK hynix unveiled a semiconductor investment plan worth about 1,500 trillion won, including an 800 trillion won production hub in the Honam region.

When combined with additional long-term investment plans separately disclosed by the companies, the total reaches around 4,700 trillion won.

Kim said annual capital expenditure of between 25 trillion won and 50 trillion won was possible in connection with the plans. He added that this "would lift the annual GDP growth rate by approximately 0.28 to 0.57 percentage points."

The second-quarter GDP growth forecast was also revised upward, to a 0.3 percent quarter-on-quarter gain from a previously projected 0.2 percent contraction.

The revision reflects the continued strength of semiconductor-led export growth in the first quarter, with the negative impact of rising oil prices partially offset by a petroleum price cap regime and the first supplementary budget.

Kim also raised his GDP growth forecasts for 2027 and 2028 by 0.2 percentage points each, to 3.0 percent and 2.3 percent, respectively.

He said the revisions reflect large-scale technology capital expenditure plans and the potential expansion of long-term supply agreements between semiconductor producers and their customers.

S&P also lifts South Korea's GDP growth outlook to 3%

S&P Global Ratings also raised its GDP growth forecast for South Korea to 3 percent, saying a semiconductor supercycle driven by expanding AI investment will continue at least through 2028.

The credit rating agency made the announcement Tuesday at a press briefing held at the Korea Federation of Banks building in Jung-gu, Seoul, on the theme of rapid growth in the AI industry and potential credit risks.

Louis Kuijs, S&P Global Ratings' chief economist for Asia-Pacific, said concerns over energy supply disruptions, inflation and rising import prices stemming from Middle East tensions had persisted over recent months, but sentiment indicators across Asian economies had not deteriorated as sharply as feared. "One reason the energy shock did not have a larger impact was the boom in AI-related technology exports," he said.

He added that S&P had not been optimistic about the South Korean economy six months ago, but had since raised its GDP growth forecast to 3 percent — "slightly above market consensus."

As recently as last year, S&P had projected South Korea's 2026 economic growth at 1.9 percent, making the latest revision a substantial upgrade.

However, Kim Je-yeol, S&P's Asia-Pacific director of corporate credit ratings, cautioned that while Korean corporate earnings as a whole had shown strong growth this year, the picture varied sharply by sector. "Growth is concentrated in one pillar — semiconductors — while other industries are either moving at a moderate pace or still facing external pressure," he said.

He said the combined operating profit of South Korea's top 100 companies in the first quarter approached 140 trillion won, surging from the same period last year, but noted that most of the gains came from the technology sector. "The strong growth of Korean companies is leaning heavily on a specific sector," he said.


yul@heraldcorp.com