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What's Up Monthly
February 25, 2026 ｜ vol. 30
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Updated KDI Economic Outlook: February 2026
Korea’s economy is projected to grow by 1.9% in 2026, up 0.1%p from KDI’s November 2025 forecast (Previous Outlook: 1.8%). While construction investment has been revised downward amid persistent weakness in regional housing markets, the overall growth outlook is lifted by stronger-than-expected semiconductor exports and a firmer recovery in private consumption.
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Key Projections
- GDP: Increasing from 1.0% in 2025 to 1.9% in 2026
- Private Consumption: Cumulative policy rate cuts and improving real incomes are expected to strengthen consumption, raising growth to 1.7% in 2026, up from 1.3% in 2025
- Equipment Investment: Semiconductor-related investment is projected to accelerate, with growth rising to 2.4% in 2026 from 2.0% in 2025.
- Construction Investment: Continued weakness in regional real estate markets is expected to keep construction subdued, improving to 0.5% in 2026 after a steep -9.9% in 2025.
- Exports: Export growth is forecast to moderate to 2.1% in 2026, down from 4.1% in 2025, as the negative impact of U.S. tariff hikes offsets part of the uplift from the semiconductor upswing.
- Current Account Surplus: Supported by the ongoing semiconductor upcycle, the current account surplus is projected to expand to USD 148.8 billion in 2026, from USD 123.1 billion in 2025.
- CPI Inflation: Despite declining international oil prices, inflation is expected to remain at 2.1% in 2026, unchanged from 2.1% in 2025, reflecting firmer domestic demand.
- Employment: Job gains are projected to slow from 190,000 in 2025 to 170,000 in 2026, largely due to a decline in the working-age population.
Risks to the Outlook
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Trade-policy uncertainty remains elevated in the U.S.; an escalation in trade disputes could increase downside pressure on Korea’s economy.
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In particular, uncertainty persists over U.S. reciprocal tariffs and potential tariffs on semiconductors and other electronics; higher duties could weigh on exports.
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If AI-related expectations cool and semiconductor demand weakens, Korea’s recovery could lose momentum.
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Should the recently volatile exchange rate rise, inflation could slightly exceed the 2% price-stability target.
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Introducing KDI’s New President, Se-Jik Kim
On February 4, the National Research Council for Economics, Humanities and Social Sciences (NRC) under the Prime Minister’s Office convened its 375th Board Meeting and appointed Professor Emeritus Se-Jik Kim of Seoul National University as the 18th President of KDI.
President Kim earned his B.A. in Economics from Seoul National University and his Ph.D. in Economics from the University of Chicago. Over the course of his career, he has served as Professor in the Department of Economics at Seoul National University and has brought extensive global policy experience as a Senior Economist in the Research Department of IMF. His public-service contributions also include serving as a Member of the Financial Development Review Committee at the Financial Services Commission, as well as working as a Visiting Research Fellow at the Korea Institute for International Economic Policy (KIEP).
With President Kim’s leadership, KDI will continue to faithfully carry out its roles and responsibilities, advancing rigorous research, timely policy advice, and constructive engagement on Korea’s key economic challenges.
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The study explores why Korea’s unemployment rate remains low despite recent economic weakness, highlighting two forces: improved matching efficiency and rising worker discouragement. It finds that advances in matching technology and demographic change have lowered unemployment, while more discouraged workers, especially youth, have also reduced the headline rate by exiting job search. The report cautions that low unemployment may mask weaker employment conditions and calls for continued matching improvements alongside efforts to ease labor market duality and strengthen participation incentives.
- Watch the full video
- Read the full report
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