A South Korean state-run economic research institute has raised its domestic growth forecast for 2026 to 1.9%, citing robust semiconductor exports and a recovery in consumer spending.

The new projection from the Korea Development Institute (KDI) represents an increase of 0.1 percentage points from its November forecast.

In its latest report, KDI stated, "Despite potential setbacks from increased U.S. tariffs and a delayed recovery in construction investment, growth this year is expected to moderately expand, driven by strong semiconductor exports and a rebound in consumption."

The revised forecast is largely in line with estimates from other major institutions and the South Korean government.

The International Monetary Fund (IMF) projects South Korea's real GDP will grow by 1.9% this year, while the Bank of Korea forecasts 1.8% and the Organisation for Economic Co-operation and Development (OECD) predicts 2.1%.

Looking ahead, KDI indicated that the full impact of higher U.S. tariffs may dampen overall export conditions, but strong chip demand fueled by optimism in artificial intelligence (AI) is expected to sustain export shipments.

Additionally, the cumulative effects of interest rate cuts, along with improvements in real income, are anticipated to support the recovery in consumer spending.

The institute noted, "Rising semiconductor export prices and declining crude oil import prices are expected to enhance purchasing power, leading to growth in real gross domestic income outpacing real GDP growth."

Meanwhile, despite an accumulation of construction orders, a recovery in construction investment may be delayed due to postponed project initiations caused by a slowdown in the local real estate market.