Apr10, 2026Research Department &Office of Economic Modeling and Policy Analysis
Recent Economic Developments
Summary
▣Korea's economy is expected to grow at a slower pace than previously anticipated, asthe supply shock stemmingfrom the war in the Middle East is likely to weigh ongrowth despite the robust semiconductor cycle and the supplementary budget.
▣CPI inflation faces significantupward pressures from a rise in global oil prices,though government price stabilization measures are expected to partiallymitigatesuch pressures.
▣Uncertainty surrounding both the growth and inflation outlook has heightened, asgeopolitical risks have escalated amid the uncertain path of the U.S. tariff policy.
Recent Economic DevelopmentsApr2026
Ⅰ.Global Economic Conditions..............................1
Ⅱ.Developments in Korea’s Economy.................2
Key Economic Indicators
▶Korea's economy is projected to grow at a pace somewhat below the previousoutlookforthis year, as the war in the Middle East has significantly amplifieddownside pressures ongrowth, though the robust semiconductor cycle andgovernment policy responses are expected to cushion the impact.▶CPI inflation faces significantcost-push upward pressuresfromfactors such asa riseinglobal oil prices, though government price stabilization measures are expectedto partially offset the extent of the increase.▶Uncertainty surrounding both the growth and inflation outlook has heightened,amid theuncertain pathoftheU.S. tariff policy, compounded by geopoliticalrisksemanating from the Middle East.
Ⅰ.Global Economic Conditions
▢Global economic growth is expected to slow markedly, due to a sharp surge ininternational commodity prices such as energy, supply chain disruptions, andheightened geopolitical uncertainty stemming from the war in the Middle East.
▪Inthe United States,robust AI-related investment is expected to underpingrowth,whiledownside pressuresare projected to intensify graduallyin thewake of the war in the Middle East.
▪Intheeuro area,the recovery is expected to weaken, as the impact of risingenergy prices weighs more heavily.▪Chinais projected to maintain growth in the mid-4% range, as relatively highenergy self-sufficiency and substantial crude oilstockpilesare expected tocushion the supply shock.
.Note: 1) 7-day moving average.Sources:Caldara et al.(2019, 2021)
Ⅱ.Developments in Korea’s Economy
▢Korea's economy is projected to grow at a pace below the previous outlook of2.0%, as the war in the Middle East has significantly amplified downsidepressures, though the robust semiconductor cycle and government policyresponses, including a supplementary budget, are expected to cushion theimpact.
▪InQ1,GDP growth is expected tosubstantiallyexceed the previous projectionof 0.9% quarter-on-quarter, as exports surge on the back of expandingsemiconductordemand,while the consumption recovery continues,supported by improving incomeand rising stock prices, and favorableeconomic sentiment.
▪InQ2, the sharp rise in energy prices stemming from the war in the MiddleEast is expected toexert downside pressure on growth, though robust AI-related investment demand and government policy responses, including asupplementary budget, are projected to cushion the impact.Inthe secondhalf of the year, growth is expected to resume its recovery as the situation inthe Middle East gradually stabilizes, though the pace of recovery is projectedto remain modest,due to factors including delays in the normalization ofenergy supply chains.
▢CPI inflation this year is expected to significantly exceed the previous forecastof 2.2%, due to a rise in global oil prices stemming from developments in theMiddle Eastconflict. However, the inflation outlook remains subject toconsiderable uncertainty regarding the global oil prices and the extent to whichoil price shocks will pass through to consumer prices.
▪In March, CPI inflation rose from the previous month, driven by a sharp increase inpetroleum product prices, while core inflation edged down slightly, due to factorsincluding a slowdown in the pace of price increases for personal services.
▪Going forward, CPI inflation is expected to facesignificantupward pressuresfromfactorssuch asa rise in global oil prices, though government price stabilizationmeasures and the recently stabilizing trend in agricultural product prices areexpected to partially offset the extent of the increase.
▢The current account surplusthis year is expectedtoexceed the previousforecast of $170 billion.
▪Thegoodsbalancesurplus is expected to exceed the previous projection on theback of a surge in semiconductor exports driven by a significant rise in memorychip prices, despite a sharp increase in energy imports.Theservices balancedeficit is expected to narrowslightlycompared to the previous projection,supported by a rise in maritimefreight rates.
▢The increase in the number of employed personsthis yearis expected toremain in line withthepreviousforecastof
