South Korea is unlikely to record literal “zero growth (0.0%)” in 2026.
Most major institutions project growth in the 1.6%–1.9% range as the baseline scenario.
However, downside risks remain significant, meaning a 0–1% near-zero growth scenario cannot be ruled out.
1. Key Forecasts for 2026
- The IMF projects South Korea’s 2026 growth rate at 1.8%, expecting a mild recovery.
- KDI (Korea Development Institute) also forecasts around 1.8%, suggesting a gradual rebound from the low growth in 2025.
- The Bank of Korea (BOK) provides a more conservative estimate of around 1.6%.
- Some global investment banks and private research firms offer higher estimates, projecting growth in the low-to-mid 2% range, supported by semiconductor recovery.
- The Korean government has expanded its 2026 budget significantly (by about 8.1%), with a focus on stimulus, AI investment, and economic support—this creates upside potential for growth.
2. Scenario-Based Outlook
Baseline Scenario (Most Likely): 1.6%–1.9%
A moderate recovery supported by improving exports (especially semiconductors) and gradual domestic demand stabilization.
Upside Scenario (Optimistic): 2%+
Possible if:
- global demand recovers strongly,
- semiconductor upcycle continues,
- private investment rebounds and export markets expand.
Downside Scenario (Pessimistic): 0–1% (Near Zero Growth)
A “return to zero growth” is possible if:
- U.S./global protectionism intensifies (tariffs, trade wars),
- domestic political instability weakens business sentiment,
- household or corporate debt risks re-emerge,
- construction and consumption remain sluggish.
3. Major Downside Risks
- Trade and tariff risks affecting export-dependent sectors
- Weakening semiconductor cycle
- Delayed recovery in domestic consumption and construction investment
- Policy and financial instability, including household debt vulnerabilities
4. Policy and Market Implications
- The government’s expansionary fiscal stance (AI investment, infrastructure, consumption support) provides upward momentum for 2026, though its sustainability remains a concern.
- The Bank of Korea is expected to maintain a mildly accommodative monetary stance while prioritizing financial stability.
- Companies should emphasize export diversification, high-value product strategies, and cost efficiency to manage uncertainty.