South Korea raises 2026 growth forecast to 3% on chip strength

South Korea raised its 2026 growth forecast by one percentage point to 3%, citing strong results from memory chipmakers as demand linked to artificial intelligence grows. Finance Minister Koo Yun-cheol told a cabinet meeting that the government had initially projected real economic growth of 2% for the year but had revised the forecast upward to 3%.

Koo said exchange-rate fluctuations could affect the outcome, while per capita income was projected to remain around $40,000. A finance ministry presentation slide shown during the meeting described the strong semiconductor market as a boost for economic indicators. The slide also said an agile policy response was needed to address changed economic conditions, including widening wealth polarisation.

The report said record profits at Samsung Electronics and SK hynix had supported optimism about the country's economic outlook. The two companies make advanced memory chips used in the fast-growing AI sector. They are also involved in a public-private investment of 800 trillion won, or $540 billion, to build a chip hub in southwest South Korea as part of wider efforts to address regional inequality.

The government has announced an economic agenda and said it plans to use expected higher tax revenue from technology companies for public projects. President Lee Jae Myung said on Monday that higher tax revenues linked to AI-driven profits were a golden window to invest strategically. He said the revenue would be used to establish a future response fund focused on future industries, youth, regional development and education, but did not provide further details.

Tuesday's cabinet meeting also identified high exchange rates, interest rates and consumer prices as risks amid the continuing Middle East conflict. The report said the chip boom has also strengthened workers' demands for higher pay. Samsung Electronics avoided a major strike in May after reaching an agreement on bonuses.

Three companies dominate production of advanced high-bandwidth memory chips: Micron in the United States and Samsung Electronics and SK hynix in South Korea. The report said these chips are used in AI processors alongside powerful GPUs to help generate chatbot responses and realistic images.