The Bank of Korea’s latest economic assessment projects growth in 2026 and 2027 above its August forecasts, supported by the semiconductor boom and its expanding benefits for other sectors. Inflation is expected to remain above target for an extended period as accumulated cost pressures feed through to prices and demand pressures strengthen. Developments in the Middle East and the semiconductor cycle remain major sources of uncertainty. Growth is expected to exceed the August projections of 3.3% for 2026 and 2.9% for 2027. Strong exports and investment led by information technology appear to have sustained growth in the third quarter, while solid domestic demand and improving conditions outside the sector are expected to support the fourth quarter. The semiconductor upswing and its broader economic effects are expected to continue into 2027. Robust semiconductor exports should also lift the current account surplus above the previous forecast, although increased overseas travel is expected to widen the services deficit slightly. Consumer price inflation eased to 2.9% year over year in the third quarter from 3.0% in the second, but core inflation rose to 2.9% from 2.4%. Full-year headline and core inflation in 2026 are expected to remain broadly consistent with the August forecasts of 2.7% and 2.5%, respectively. In 2027, both measures are expected to exceed their previous projections of 2.3% and 2.5%. Inflation risks run in both directions, reflecting oil price volatility, broader demand pressures, a potentially larger decline in the USD/KRW exchange rate and government price stabilization measures.

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