The Asian Development Bank (ADB) has projected that the South Korean economy will grow by 2.6% this year.
This marks a significant upward adjustment from its 1% range forecast three months ago, aligning its outlook with other institutions such as the International Monetary Fund (IMF).
According to the Ministry of Economy and Finance on July 9, the ADB released its "Asian Development Outlook" on July 8 (local time), raising South Korea's economic growth forecast for this year to 2.6%, up 0.7 percentage points (p) from its April projection.
The ADB publishes its annual outlook every April, followed by a supplementary outlook in July and a revised outlook in September.
The ADB also raised its growth forecast for South Korea next year by 0.1 percentage points to 2.0%.
This revised outlook reflects stronger-than-expected economic growth in the first quarter, as well as the effects of government measures related to the Middle East conflict, such as price caps on oil and fuel tax cuts.
The ADB expects that increased exports driven by global demand for artificial intelligence (AI) will be a primary factor in South Korea's economic growth for this year and next.
While economic growth may be affected by rising production costs due to higher energy prices and supply chain disruptions, the ADB noted that these downward pressures would be offset by the robust semiconductor market.
Consumption is expected to remain stable, supported by rising stock prices, strong performance from IT companies, and government support policies.
Potential downside risks to the economy mentioned include long-term energy supply disruptions, the reimposition of tariffs by the United States, and the possibility of a stock market correction.
The ADB projected inflation rates for South Korea at 2.7% for this year and 2.2% for next year.
These figures represent upward adjustments of 0.4 percentage points and 0.2 percentage points, respectively, from the April forecast, reflecting the rise in international energy prices.
The ADB set the growth rate for advanced economies in the Asia-Pacific region, which includes South Korea, at 2.6% for this year.
This is an increase of 0.4 percentage points from April.
Among other advanced Asia-Pacific economies, forecasts were raised for Taiwan (9.5%, up 1.9 percentage points), Hong Kong (3.0%, up 0.4 percentage points), and Singapore (3.2%, up 2.2 percentage points).
Japan (0.7%) and Australia (2.0%) maintained their previous forecasts, while New Zealand (1.6%) saw its outlook lowered by 0.3 percentage points.
Developing economies in the Asia-Pacific region are expected to grow by 4.9%, down 0.2 percentage points from the April forecast.
The ADB explained that this reflects downside risks such as increased production costs and dampened economic activity caused by prolonged energy price hikes and supply chain disruptions stemming from the Middle East conflict.
However, the bank maintained its growth forecast for next year at 5.1%, the same as in April, citing expectations that the impact of the Middle East conflict will diminish, thereby easing downward pressure on the economy.
Meanwhile, the International Monetary Fund (IMF) also revised its growth forecast for South Korea to 2.6% in its World Economic Outlook released on July 8.
This is a 0.7 percentage point increase from its April forecast of 1.9%.
The Bank of Korea also raised its growth forecast for South Korea to 2.6% last May.
The government is scheduled to announce its revised economic outlook in its strategy for the second half of the year next week.