The South Korean government has upgraded its economic outlook from 'recovery' to 'robust growth,' citing significant increases in exports, particularly in semiconductors, and a clear trend of rising investments. However, it noted that consumer recovery is relatively slow, with high oil prices and uncertainties surrounding U.S. artificial intelligence (AI) regulations posing risks.
The Ministry of Economy and Finance stated in its 'November 2026 Economic Trends (Green Book)' released on the 13th, "Recently, our economy has shown robust growth, characterized by a substantial increase in exports and an expanding trend in investments, while consumer spending is gradually improving." The terminology was changed from 'economic recovery trend' used in the Green Books of September and October to 'robust growth.'
A ministry official explained during a briefing, "Recovery refers to the situation where the economy improves before reaching a trend growth level after hitting a bottom. We adjusted our economic outlook based on the third-quarter GDP growth rate, this year's annual growth rate, and next year's growth projections."
The key reasons for the upgraded outlook are exports and investments. The real GDP for the third quarter, announced on October 27, increased by 1.0% compared to the previous quarter. The government assessed that the cumulative growth rate for the first three quarters of this year reached 3.6%, an improvement over last year's first half (0.4%) and second half (1.8%).
Exports have seen a sharp increase in both prices and volumes. In October, exports surged by 93.7% year-on-year, driven by strong performances in semiconductors, computers, and cosmetics. The export volume index for October also rose by 43.9% compared to the same month last year, continuing an upward trend from 20.1% in July, 25.9% in August, and 32.2% in September.
The government anticipates that cumulative exports will reach $963.7 billion as of November 11, predicting that South Korea will achieve its first-ever annual export total of $1 trillion before the end of next week.
Production and investment indicators have also improved. In September, total industrial production increased by 3.0% month-on-month, with manufacturing output rising by 9.0%, and construction and service sectors growing by 5.8% and 0.5%, respectively. Facility investment rose by 5.3% from the previous month and 10.1% year-on-year. The government expects positive carryover effects into the next quarter due to significant increases in production and spending at the end of the quarter.
However, the pace of domestic recovery lags behind that of exports and investments. Retail sales in September increased by 3.6% from the previous month but fell by 0.4% compared to the same month last year. The consumer sentiment index for October also dropped by 1.2 points to 105.4 from the previous month.
The government projects that private consumption will grow by 1.3% in 2024 and 1.5% in 2025, with an expected increase of 1.9% to 2.0% this year and just over 2% next year. While monthly indicators show significant volatility, the government maintains that a gradual recovery trend is continuing in the medium to long term.
A ministry official remarked, "There is always a gap between indicator-based and felt economic conditions. While private consumption is approaching trend levels, challenges remain for traditional markets and small businesses, necessitating continued policy efforts."
Employment conditions have also seen some improvement. In October, the number of employed individuals rose by 139,000 compared to the same month last year, surpassing the increase of 113,000 in September. The government believes that the positive impacts of increased exports and production are gradually being reflected in the job market. However, challenges persist in vulnerable sectors, with youth employment decreasing by 196,000.
The consumer price inflation rate in October was 2.8%, slightly down from 2.9% in the previous month. However, inflationary pressures remain due to a 14.9% increase in oil prices compared to last year.
Uncertainties surrounding AI industry regulations, highlighted after the U.S. midterm elections, have also emerged as a new risk factor. The government noted that while concerns over U.S. semiconductor industry regulations have increased market volatility, the actual impact on the real economy has been limited so far.
A ministry official stated, "There have been no signs yet of reduced investment performance or plans in U.S. data centers. Currently, concerns among financial market participants have not translated into impacts on the real sector."
The government plans to closely monitor the uncertainties related to the Middle East conflict and the AI industry while expanding growth foundations through three major mega-projects, seven SEED initiatives, the Korean Green Transition (K-GX), and the promotion of the service industry. Additionally, it aims to strengthen policy responses to ensure that the benefits of growth are widely distributed, focusing on stabilizing livelihoods and reducing polarization.
* This article has been translated by AI.
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