The Bank of Korea published its April “Recent Economic Developments” assessment, indicating Korea’s 2026 growth is likely to come in below its previous 2.0% outlook as the supply shock from the war in the Middle East weighs on activity despite support from a strong semiconductor cycle and a supplementary budget. The update also points to CPI inflation in 2026 significantly exceeding the prior 2.2% forecast, driven by higher global oil prices, with some offset from government price-stabilisation measures, and notes heightened uncertainty around both growth and inflation amid geopolitical risks and an uncertain path for US tariff policy. Within the year, first-quarter growth is expected to substantially exceed the previous 0.9% quarter-on-quarter projection on stronger exports and a continuing consumption recovery, while the second quarter is expected to face headwinds from higher energy prices, partly cushioned by AI-related investment demand and fiscal support; a recovery is still anticipated in the second half as conditions stabilise, but with only a modest pace due to delays in normalising energy supply chains. The current account surplus is projected to exceed the previous USD 170 billion forecast, led by stronger semiconductor exports and higher memory-chip prices despite rising energy imports, while the employment gain is expected to remain in line with the previous +170,000 forecast, with public-sector job creation offsetting pressures from the Middle East conflict and weak construction activity.
Bank of Korea 2026-04-10
Bank of Korea projects 2026 growth below 2.0% and CPI inflation above 2.2% as the Middle East war lifts energy costs
The Bank of Korea’s April “Recent Economic Developments” report signals 2026 growth will likely fall below the previous 2.0% outlook, while CPI inflation is expected to significantly exceed the prior 2.2% forecast due to higher global oil prices and uncertainty from geopolitical risks and US tariff policy. First-quarter growth is now seen substantially above the earlier 0.9% qoq projection on stronger exports and consumption, with only a modest recovery expected in the second half. The current account surplus is projected to surpass the earlier USD 170 billion estimate on stronger semiconductor exports and higher memory-chip prices, while employment gains are expected to remain broadly unchanged at around 170,000.