The Bank of Korea’s May 2026 economic outlook raises Korea’s 2026 GDP growth forecast to 2.6% from 2.0% and its CPI inflation forecast to 2.7% from 2.2%. The central bank expects the economy to absorb the Middle East-driven supply shock better than previously projected because a strong semiconductor cycle and government measures, including a supplementary budget, support activity, while higher oil prices and the pass-through of energy costs push inflation higher. The 0.6 percentage point growth revision is driven mainly by stronger IT export momentum, with government measures partly offsetting the drag from the Middle East war. Core inflation is now seen at 2.4% in 2026, 2027 growth at 2.1%, and 2027 CPI inflation at 2.3%. The current account surplus is projected at USD 250 billion and employment growth at 180,000. The baseline assumes Strait of Hormuz transit recovers to about 60% of pre-war levels by Q4 and Brent crude averages USD 103 per barrel in Q2 before easing to the mid-USD 90s in H2. Uncertainty remains exceptionally high, especially around the semiconductor cycle and the Middle East situation, with scenario analysis showing that a prolonged stalemate could lower 2026 growth by 0.5 percentage points and raise inflation by 0.3 percentage points relative to the baseline.
Bank of Korea2026-05-28
Bank of Korea lifts 2026 growth forecast to 2.6% and inflation forecast to 2.7% amid chip strength and Middle East oil shock
The Bank of Korea raised its 2026 GDP growth forecast to 2.6% from 2.0% and its consumer price index inflation forecast to 2.7% from 2.2%, citing stronger semiconductor exports and government support measures alongside higher oil and energy costs. It now projects 2027 growth at 2.1%, 2027 CPI inflation at 2.3%, a current account surplus of USD 250 billion, and employment growth of 180,000, while warning that elevated uncertainty around the Middle East and the semiconductor cycle could alter these outcomes.