Citi has revised up its nominal gross domestic product forecast for South Korea in 2026 to 15.3% from a prior projection of 10.6%, citing unexpectedly strong first-quarter outcomes that were led by elevated memory chip prices. The investment bank also increased its assumption for the GDP deflator to 11.9% from 7.4%, while preserving its real GDP forecast at 3.0% for the year.
The updated nominal growth outlook would mark the highest annual nominal expansion since 1995 if it materializes. Citi's move follows official revisions to first-quarter data from the Bank of Korea.
The Bank of Korea issued a second estimate for first-quarter 2026 GDP that raised the real growth figures to 1.8% quarter-over-quarter and 3.8% year-over-year, up from the initial estimates of 1.7% quarter-over-quarter and 3.6% year-over-year. The central bank said the upward revision reflected stronger facilities investment and higher private consumption in the quarter.
Alongside the real activity revisions, the Bank of Korea reported first-quarter nominal GDP growth of 17.1% year-over-year, a marked increase from 6.3% in the fourth quarter of 2025. The GDP deflator rose 12.9% year-over-year in the first quarter, compared with a 4.7% increase in the prior quarter. The central bank highlighted memory chip prices as a key driver of the deflator’s jump. The 17.1% nominal GDP growth recorded in the quarter is the strongest showing since the first quarter of 1976.
That first-quarter nominal GDP outcome exceeded Citi’s own estimate for the quarter of 10.2% year-over-year. Citi expects the pronounced trend in the GDP deflator to persist through the remainder of 2026, underpinned by continued strength in memory chip export prices.
In its analysis, Citi noted that stronger nominal GDP growth would likely lower government debt-to-GDP ratios. The bank also suggested the fiscal response could turn expansionary in the second half of 2026 and into 2027, potentially boosting domestic demand. Citi anticipates a policy mix in that period characterized by expansionary fiscal measures alongside tightening monetary policy.
Summary of the data and outlook
Key official revisions show higher real and nominal growth for Q1 2026, with semiconductor export prices substantially lifting the GDP deflator. Citi has adjusted its 2026 nominal GDP and deflator assumptions upward while leaving its real GDP forecast unchanged.