ING’s updated forecast suggests South Korea’s economy could expand substantially in 2026: instead of the previously expected roughly 3 percent annual GDP growth, the institute now anticipates about 4 percent. The upward revision is driven mainly by a strong semiconductor sector buoyed by global artificial intelligence investments.
Strong exports and a powerful chip cycle
Early June data showed South Korea’s exports rising 60.4 percent year‑on‑year, with semiconductor shipments jumping 188.4 percent. Exports adjusted for working days grew nearly 50 percent, indicating a strengthening underlying trend rather than a one‑off spike. Growth was particularly pronounced toward China and the United States.
Several structural and demand factors support the chip cycle: rapidly growing demand for advanced, high‑performance chips; structural shortages in older semiconductor types; limited pace of capacity expansion; and strong orders from major technology firms investing in cloud and AI infrastructure. Investments by China and Europe to build their own AI capacity also help sustain a longer supercycle.
Prices, exchange rates and the current account
DRAM prices have stabilized recently but remain more than four times higher than a year ago. ING estimates that a 20–30 percent rise in HBM chip prices in 2026 could keep semiconductor export growth in triple digits through early 2027. As a result, the current account surplus could approach $250 billion in 2026, compared with $123.1 billion for all of 2025.
The won may remain weak: ING expects the USD/KRW rate to hover around 1500 for much of 2026.
Investment and a K‑shaped recovery
Investment displays a split pattern. Machinery and equipment spending linked to the semiconductor industry is expanding rapidly as Korean chipmakers boost capacity, and imports of semiconductor production equipment have risen markedly. In contrast, construction remains the weak link, held back by past downturns, higher input costs and interest‑rate sensitivity. ING describes this divergence as a K‑shaped recovery.
Employment, consumption and inequality
Tech sector gains could have a positive but uneven effect on domestic consumption. The KOSPI has risen largely on the back of major chipmakers including Samsung and SK Hynix; these companies have signalled bonuses and dividend payouts that may raise incomes and wealth for some households. Because share ownership is concentrated among higher‑income groups, ING warns the upswing may deepen social inequality.
Budgetary implications and fiscal stance
Rising corporate profits, equity market activity and higher incomes helped push state revenues up 15.4 percent year‑on‑year in the January–April period. This revenue improvement could allow the government to sustain a more expansionary fiscal stance — including social spending and R&D support — while allocating part of the extra receipts to strengthen the fiscal position.
Energy dependence and inflation risks
South Korea remains heavily dependent on Middle Eastern energy imports, though it has so far mitigated shocks through price caps, subsidies, tax cuts, food vouchers and diversification of supply sources. Despite a fragile Middle East situation after the US‑Iran ceasefire, ING believes the AI‑led technology cycle could offset negative energy market effects.
Inflation prospects are less benign: ING forecasts 3 percent inflation in 2026. Government measures such as price caps and frozen energy prices cannot be sustained indefinitely; when they are phased out, cost pass‑through, rising wages, higher asset prices and a weaker currency could put further upward pressure on inflation.
Monetary policy and yields
ING expects the Bank of Korea to move toward tighter policy: total rate hikes of 100 basis points by the first half of 2027 could lift the policy rate to 3.50 percent. Markets already price in a possible 25 basis‑point increase in July, but ING anticipates gradual, quarterly tightening. Korean government bond yields could rise accordingly.
Conclusion
ING sees the global AI investment wave powering a semiconductor supercycle that significantly improves South Korea’s growth and external balance prospects in 2026, while also posing inflationary, exchange‑rate and distributional challenges amid a K‑shaped recovery.
