The South Korean Ministry of Finance stated on Friday that the Asian Development Bank (ADB) has increased its economic growth projection for South Korea this year to 1.9%. This revision is attributed to stronger export performance and improvements in private consumption.

The updated figure represents a 0.2 percentage point increase from the forecast made by the ADB in December of the previous year.

The ADB's latest projection aligns with forecasts from the International Monetary Fund and the Korea Development Institute, both of which also predict a 1.9% growth rate for South Korea's economy this year. The Bank of Korea, however, maintains a slightly higher forecast of 2% growth.

The ADB credited the upward revision to robust semiconductor exports amid a global industry upturn, coupled with expectations that expansionary fiscal policies and potential key interest rate cuts later this year will stimulate domestic demand.

The institution also noted that the South Korean government's increased spending in strategic sectors such as semiconductors, defense, and biotechnology is anticipated to have a positive impact.

Nevertheless, the bank highlighted several downside risks, including the possibility of additional US tariff measures, sluggish construction activity, and uncertainties surrounding demand for AI-related chips.

The Ministry of Finance clarified that the ADB's outlook assumes a scenario where tensions in the Middle East stabilize within a month. Economic uncertainties have intensified since the US and Israel conducted airstrikes against Iran in late February.

The ADB report also pointed out that the potential economic effects of South Korea's supplementary budget have not been factored into the current forecast, suggesting that actual growth could differ from the projection.

The ADB expects the South Korean economy to also grow by 1.9% in 2027.