Global Market: South Korea targets AI-led growth, raises 2026 GDP forecast to five-year high; chip stocks in focus

South Korea on Tuesday unveiled an ambitious economic strategy centred on artificial intelligence and semiconductor investments, while raising its 2026 economic growth forecast to 3.0%, the fastest pace in five years, as the country rides a global semiconductor boom, Reuters reported.

In its semi-annual economic policy plans, the finance ministry projected the economy to expand 3.0% this year, sharply higher than its previous estimate of 2.0% and an improvement from last year's 1.1% growth. The revised forecast marks the strongest annual expansion since 2021, according to Reuters.

The ministry said its policy agenda would focus on three key priorities, including lifting South Korea's potential growth rate to 3% from an estimated level below 2%.


To achieve this, the government will accelerate three major investment projects announced last month, covering semiconductor manufacturing, AI data centres and physical AI technologies, Reuters reported.

The latest policy push follows the government's announcement earlier this week that it plans to increase its 2027 budget by at least 10% to more than 800 trillion won ($532.73 billion). The additional spending will prioritise mega projects and be supported by stronger tax revenues from the semiconductor industry, according to Reuters.

Vice Finance Minister Lee Hyoung-il said robust exports driven by the semiconductor boom have created significant opportunities for the economy, but policymakers still need to address several structural challenges, the news agency added.

Asia's fourth-largest economy recorded its strongest quarterly growth in nearly six years in the latest quarter, driven by surging chip exports amid rising global investments in artificial intelligence, Reuters said.

The government also outlined longer-term ambitions of making South Korea one of the world's four largest exporters and raising gross national income per capita to $50,000 from an expected $40,000 this year. South Korea is currently among the world's top five exporting nations, according to Reuters.

Alongside its growth strategy, the ministry pledged measures to tackle elevated inflation, a weak currency and higher bond yields linked to tensions in the Middle East. Planned steps include fuel price caps, extending foreign-exchange regulatory easing and providing low-cost policy loans during the second half of the year, Reuters reported.

The ministry raised its 2026 inflation forecast to 2.6% from 2.1% projected in January, citing higher oil prices. The revised estimate compares with inflation of 2.1% in 2025 and would represent the highest annual inflation rate since 2023.

Looking ahead, the finance ministry expects economic growth to moderate to 2.2% in 2027, with inflation also easing to 2.2%, according to Reuters.

Impact on stocks

The government's aggressive push to expand AI and semiconductor investments is expected to support sentiment towards South Korean technology and chipmakers, which have already benefited from the global AI-driven demand cycle. Increased public spending on semiconductor infrastructure, AI data centres and related technologies could strengthen earnings visibility for companies across the semiconductor supply chain.

The upgraded growth outlook is also likely to bolster broader investor confidence in South Korean equities, particularly export-oriented sectors such as technology, electronics and industrials. However, the higher inflation forecast and concerns over elevated bond yields may temper gains in interest rate-sensitive sectors, while companies with high energy costs could remain exposed if oil prices stay elevated.

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