KoreaEconomicOutlook (February 2026)
-Reboundingto2%AmidSectoralImbalance-
Summary
▣Korea's economic growthisprojectedat2.0%,wellabovelastyear’s1.0%(Nov.’25forecast:1.8%).
￭This reflectstherobustsemiconductorcycleandafavorableglobaleconomicbackdrop,despitetheimpactofU.S.tariffsandsluggishconstructioninvestment.
▣CPI inflationthis yearisrevisedslightlyupwardto2.2%(Nov.’25forecast:2.1%).
￭Demand-side pressures remain limited; the revision reflects cost-push pressures fromcertainitems, including semiconductors.
▣Goingforward,thesemiconductorcycle,tradeenvironment,andgeopoliticaltensionswillbekeyfactorsshapingtheprojectiontrajectory.
KoreaEconomicOutlook
Rebounding to 2% amid SectoralImbalance
IndigoBook
February2026
Ⅰ. EconomicConditions....................................................1Ⅱ. EconomicOutlook.........................................................2Ⅲ.RiskstotheOutlook.....................................................2ForecastSummaryQuarterlyForecastsfortheOne-Year-AheadHorizon
▶The Koreaneconomy is projected toexpand by2.0%in2026,underpinned bythestrengthenedsemiconductorcycleupturnandastronger-than-expectedglobaleconomic backdrop,despitetheimpact ofU.S.tariffsandasluggishrecoveryinconstructioninvestment.▶CPI inflation isexpectedat2.2%,slightlyabove thepreviousforecast,as costincreasesincertainitems,suchaselectronicdevicesandinsurancepremiums,have addedto inflationary pressures,whiledemand-side pressures remainsubdued.
Ⅰ.Economic Conditions
▢The global economy is expected tosustain solidgrowthin the low3%range,supported by robust AI-related investment and accommodative monetary andfiscal policies in major economies;however, uncertainty surrounding theoutlook is assessed to have increased following the court ruling invalidatingU.S. reciprocal tariffs.
▪The United States is projected to post robust growth,underpinned byexpanding AI-related investment and policysupport,including the OBBBA.Theeuro area is expected to maintain modest growth, supported byaccommodative financial conditions and fiscal expansion, despite constraintsfrom trade conditions including U.S. tariffs.Meanwhile,China’sgrowth isexpected tobe lower thanlast year due to persistent domestic demandweakness, including the real estate market downturn, and slower exportgrowth,although export market diversification and domestic stimulusmeasures are projected to partially offset these headwinds.
▪Global trade growthis expected to moderate somewhatfrom last yearas tradeuncertainty persists, althoughrobustAI-related trade and trade diversificationefforts–such as the EU-India FTA–areexpected to limit the extent of theslowdown.Theglobal semiconductorindustrycontinues to see rapid memory-ledgains asAI model deployment expands from training to inference. However, bothupside risks–such as the proliferationof physical AI–and downside risks–including an AI investment correction and U.S. tariff imposition–remain significant.
▪Global oil prices(Brent crude)have beenrisingconsiderably recentlyamidheightenedmilitary tensionsbetween the U.S. and Iran, but are projected todecline gradually over the course of the year as excess supply conditions persist.
▢On the domestic front, income conditions are improving on the back of strongIT corporate earningsand rising stock prices, and economic sentiment*remainsfavorable. However, the non-IT sector continues to underperform, and FX andfinancial market volatility remain latent risk factors.
*CompositeConsumerSentimentIndex:Jan.-Apr.’25avg.93.2→May101.7→Aug.111.2→Nov.112.3→Feb.‘26112.1
▪Nominal wage growthis expected to improve gradually, driven in part bystrong IT corporate performance.
▪Corporatebond rateshaverisen, reflecting diminished expectations for rate cutsandmarket tightness.Thewon to U.S. dollar exchangeratehasdeclined to themid-1,400 level, but hasexhibitedheightened volatility recently,driven byoverseas securities investment by residents andco-movementwith the yen.Housing priceshave continued to rise, primarily in the Seoul metropolitan area,but the pace of increase has moderated recently owing to government measures.
U.S.Tariff Policy: Status and Assumptions
Ⅱ.EconomicOutlook
▢GDP growth this year isprojectedat 2.0%, above the November forecast,supported bythestrengthenedsemiconductorcycle upturnand a stronger-than-expected global economic backdrop, despite theimpact ofU.S. tariffsand a sluggish recovery in construction investment.
▪InQ12026,privateconsumption is expected tosustainits recovery,exportsare projectedto post stronggrowthled by semiconductors, and base effectsfrom the previous quarter’s contraction (-0.3%)–mainly in the investmentcomponent–are also at play. As a result, the growth rate is expected tosignificantly exceedthe earlier projection of 0.3%, approaching 1%(0.9%).
▪FromQ2 onward, the consumption recovery is expected to expand graduallyon the back of improving income conditions, while export growth shouldcontinue, supported byrobu
