Moody’s nearly doubles Korea’s 2026 growth forecast to 3.5% on chip boom

International credit rating agency Moody’s has raised its forecast for Korea’s economic growth this year, from 1.8 percent in early 2026 to 3.5 percent recently, citing a semiconductor boom and robust exports, according to relevant authorities on Tuesday.

The agency also expects the chip boom to last until at least mid-2027, as it views few companies as able to replace Korean suppliers of advanced memory chips.

Moody’s projected Korea’s GDP to grow 3.5 percent this year and 2.7 percent next year in a report released after completing its latest periodic review of the country’s sovereign credit rating.

This year's forecast is 0.3 percentage points higher than the 3.2 percent average projection from eight major investment banks compiled by the Korea Center for International Finance as of the end of last month.

Moody’s had forecast growth of 1.8 percent for this year in its report on Korea’s sovereign credit rating in February. It nearly doubled that projection within six months. After raising its outlook for the global economy to 2.5 percent in May, the agency lifted it by another 1.0 percentage point just three months later.

The substantial upgrade reflects a semiconductor supercycle and strong exports.

The agency also noted that Korea’s goods exports jumped 51 percent on year from January through July. It attributed the export growth to strong performance in the semiconductor sector.

Moody’s also favorably viewed the government’s “mega projects” aimed at fostering growth in three key sectors: semiconductors, AI data centers and physical AI. The agency assessed that the mega projects are designed to create new engines of growth and promote more balanced development beyond the greater Seoul area. It noted that the initiatives reflect Korea’s sustained and consistent efforts to keep pace with technological advances.

Moody’s also noted that successful implementation of the policies could boost productivity and raise Korea’s potential growth rate.

The stronger growth outlook and continued surplus tax revenue are also expected to improve Korea’s fiscal position beyond earlier projections. Moody’s expects the country’s fiscal deficit to reach 3.8 percent of GDP this year, 0.1 percentage point below the original target.

Still, the agency identified rising mandatory spending associated with an aging population, defense and security costs and investment needed to maintain export competitiveness as risks to fiscal sustainability over the medium to long term.

Fiscal pressures could mount if no further policy reforms are undertaken, Moody’s said.

Moody’s evaluates Korea’s sovereign credit rating at “Aa2.” The institution pointed to effective policymaking and economic strength as key pillars of Korea’s creditworthiness, but identified rising government debt and mounting fiscal pressures from an aging population as long-term challenges.

The agency stressed, however, that the latest report was not issued to make a new determination on Korea’s sovereign credit rating. It also noted that the latest report does not signal a potential change in the rating.