Overview
Bank of America has revised its projection for South Korea's 2026 economic growth to 3.1% year-over-year, up from an earlier estimate of 1.9%. The revision is driven by what the bank describes as a forceful semiconductor upcycle that is producing above-trend economic expansion for the country.
Drivers behind the revision
The bank highlights a pronounced upward adjustment in DRAM price expectations as a central factor. Bank of America now anticipates DRAM prices will climb 48% year-over-year in 2026. That change feeds directly into the broader export and income dynamics that underpin the country’s growth outlook.
Year-to-date data show South Korea’s export growth accelerating to 41% year-over-year, with semiconductors accounting for 36 percentage points of that increase. The persistent external stimulus from semiconductor exports is cited as the anchor for the upgraded forecast.
Contributions to GDP and the external position
Bank of America expects net exports to add 1.3 percentage points to GDP growth in both 2026 and 2027. In addition, the firm projects the current account surplus will widen to 15% of GDP this year, reflecting the substantial export-driven inflows.
Link to the AI-driven chip cycle
The revised outlook is tied to the ongoing artificial intelligence cycle and its influence on global chip demand. The bank replaced its early-April forecast of 1.9% growth for 2026 with the substantially higher 3.1% estimate because of that cycle’s impact on semiconductor markets.
Implications
The forecast represents a clear shift to above-trend expansion for South Korea, with the semiconductor sector identified as the primary engine of acceleration. The update changes the near-term growth narrative and the composition of demand supporting the economy.
Conclusion
Bank of America’s upgrade centers on a concentrated external impulse from semiconductor exports and higher DRAM price expectations, with the firm expecting continued positive contributions from net exports into both 2026 and 2027 and a stronger current account balance this year.
Key points
- GDP forecast for 2026 raised to 3.1% from 1.9% due to a semiconductor upcycle.
- DRAM prices are projected to rise 48% year-over-year in 2026; semiconductors contributed 36 percentage points to year-to-date export growth of 41%.
- Net exports expected to add 1.3 percentage points to GDP in both 2026 and 2027; current account surplus forecast to improve to 15% of GDP this year.
Risks and uncertainties
- Heavy reliance on the semiconductor upcycle for growth creates exposure if chip demand or prices do not hold as projected.
- The upgrade depends on DRAM price projections; changes to those projections would alter the outlook for exports and growth.
- Concentration of export gains in semiconductors leaves the external position and GDP sensitive to developments in the chip market.