The IMF raised its forecast for South Korea's economic growth this year to 3.3%, with semiconductor demand outweighing damage from the Middle East war, the Ministry of Economy and Finance said.
The forecast rose from 2.6% in July and 1.9% in April. The ministry presented the figures in its own video, “IMF forecasts 3.3% growth for Korea! Why the semiconductor boom feels different,” published Oct. 28.
The IMF attributed the improvement to overseas demand for semiconductors, which more than offset the war's negative effects. It identified South Korea and Taiwan as suppliers of hardware for artificial intelligence.
Investment in artificial intelligence requires data centres and servers that use high-performance memory chips. That demand has supported Korean exports, although stronger national growth does not mean household finances improve at the same pace.
The ministry put semiconductor exports last month at $60.3 billion, a record and nearly half of total exports. It also said the government had revised this year's expected tax revenue upward by 63 trillion won last month.
Corporate tax accounted for more than half of the revenue increase, with semiconductor companies' earnings contributing to the gain. The export boom and higher tax receipts therefore shared a source.
The IMF's forecasts showed differences between economies benefiting from artificial intelligence spending and those facing energy costs or disruption. It projected growth of 1.1% for the euro zone and 0.7% for Japan.
The fund projected a 0.3% contraction for the Middle East and Central Asia, reflecting prolonged disruption to energy exports. South Korea still faces higher imported energy costs despite the strength of its chip industry.
The government's projected debt ratio, which measures public debt against the size of the economy, fell to 50.6% after the supplementary budget from 51.6% in the original budget.
A larger economy accounted for most of that decline, rather than the repayment of 1 trillion won of debt. The government raised its nominal growth projection, which includes price increases, to 4.9% from 3.9%.
Higher prices can increase the economy's measured size and lower the debt ratio without a corresponding reduction in borrowing. The government said it would consider using additional tax revenue to reduce bond issuance this year.
The IMF recommended rebuilding room in public finances to respond to future needs. It also identified continuing risks from Middle East tensions, trade disputes, commodity prices, inflation and a possible reassessment of artificial intelligence's productivity benefits.
The fund's forecasts assumed the Strait of Hormuz would begin reopening in February 2027 and energy supplies would return to pre-war levels around October 2027. A change in those assumptions could change the outlook.
The IMF projected global inflation of 4.7% this year. Higher energy and food prices continue to burden households even as semiconductor exports lift national growth.
“The burden on people's livelihoods continues,” the government said, in a quotation translated from Korean, citing higher prices and interest rates. It also identified continuing inequality and other structural problems.
The IMF recommended prioritising price stability and providing temporary assistance to vulnerable groups where needed. The remarks gave no timetable for stronger semiconductor exports to translate into broader improvements in household finances.
