Moody’s Lifts Korea Growth Forecast to 3.5% on Chips

Precision manufacturing equipment inside a semiconductor fab

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As of August 18, 2026, Moody's has sharply raised its 2026 GDP growth forecast for South Korea to 3.5%, citing a semiconductor boom that's lasted longer than expected. The agency expects growth to cool to around 2.7% next year, with export growth as the main driver behind the upgrade.

3.5%Moody's new 2026 GDP growth forecast for Korea

2.7%Moody's 2027 GDP growth forecast for Korea

51%Year-over-year growth in Korea's goods exports, January-July 2026

3.8%Moody's projected fiscal deficit as a share of GDP this year

Key points

Moody's raised its 2026 Korea growth forecast twice this year: from 1.8% in February to 2.5% in May, and now to 3.5%.
Moody's new figure tops the 3.2% average forecast from eight major investment banks tracked by Korea's International Finance Center.
Moody's cited a lack of real rivals to Korea in supplying premium memory chips as a key reason for the upgrade.
Korea's fiscal deficit is now projected at about 3.8% of GDP, a slight improvement from earlier targets.

Moody's latest report puts this year's South Korea GDP growth forecast at 3.5% — nearly double the 1.8% figure the ratings agency was using just six months ago, after two rounds of upward revisions. The agency pointed to one main driver: a semiconductor boom that's lasting longer than almost anyone expected.

The report says there's no real competitor that can replace Korean firms in the premium memory chip market, and that this supply edge should hold at least through mid-2027. Moody's also flagged that Korea's goods exports jumped more than 50% year-over-year in the January-July period, crediting the explosive growth of the chip sector as the main force behind that surge.

The government's push to build out semiconductors, AI data centers and physical AI also drew a mention. Moody's described it as an effort to build new growth engines while easing Korea's heavy concentration around the greater Seoul area, calling it a consistent policy response to shifting technology trends. If it goes smoothly, the agency said, the strategy could also boost productivity and potential growth over time.

On the fiscal side, the upgraded growth outlook and higher-than-expected tax revenue are expected to bring this year's budget deficit in slightly below target, near 3.8% of GDP. Still, the report warned that without structural reforms, rising mandatory spending tied to an aging population, defense and security costs, and investment needed to keep exports competitive could squeeze the budget over the long run.

Moody's currently rates Korea at Aa2, the third-highest tier on its scale. The agency stressed this report is part of a routine review and doesn't signal any change — or pending change — to that credit rating.

In Korea right nowWith investment banks racing to gauge how long the chip 'supercycle' will last, Moody's forecast stands out for coming in above the average of major institutions. Korea's export-heavy, chip-dependent economy — often seen as a risk — is now the very thing driving growth forecasts higher, and that's putting fresh attention on both the chip market and whether the government can keep its policy push going.

FAQ

Why did Moody's raise its Korea growth forecast by so much?

Moody's pointed to sustained chip demand, a lack of real competitors in premium memory supply, and a sharp jump in exports in the first half of the year as the main reasons.

Does this report change Korea's credit rating?

No. Korea's rating stays at Aa2. Moody's said the report is a routine review and doesn't signal a rating change.

How much longer is the chip boom expected to last?

Moody's expects the current cycle to stay strong at least through mid-2027.