Citibank Raises South Korea's Growth Forecast for This Year to 3.8%, Up 0.1 Percentage Point

[Financial News] Citibank Korea raised its forecasts for South Korea's economic growth this year and next, reflecting a recovery in automobile production and favorable conditions in the semiconductor industry.
Jinwook Kim, an economist at Citibank Korea, raised his forecast for real gross domestic product (GDP) growth in the third and fourth quarters of this year from 0.8% to 1.0% quarter on quarter in a report released on the 30th. He also raised the annual real GDP growth forecasts to 3.8% for this year and 3.3% for next year, up 0.1 and 0.2 percentage points, respectively, from the previous forecasts.
Kim explained, "We are raising our growth forecast for the third and fourth quarters of this year to reflect the recovery in the automobile sector and continued strength in semiconductors. We expect strength across manufacturing, construction investment and equipment investment."
According to the report, all-industry production fell 1.3% month on month in August, a larger decline than the 0.1% decrease recorded in July. Manufacturing and public administration contributed -1.4 and -0.2 percentage points, respectively. The negative contributions from the two sectors outweighed the positive contributions from services and construction.
In manufacturing, production of automobiles and parts, tires and other products declined due to strikes and summer vacations. Services output increased, but retail sales fell as purchases of durable goods, including automobiles, weakened. Equipment investment declined despite continued capital spending in the semiconductor sector, while construction investment increased.
However, Citibank Korea viewed the manufacturing slowdown in August, led by the automobile sector, as temporary, citing the normalization of automobile exports from September 1 to 20. The bank said a recovery in automobile production and favorable conditions in the semiconductor industry would support growth.
Kim said, "The expansion of the South Korean economy, led by semiconductors, will continue from 2026 to 2028, supported by an extended upcycle in memory semiconductors."
[email protected] Ye Byung-jung Reporter