AMRO raises South Korea's 2026 growth forecast to 3.3%, upgrades 2027 outlook

The ASEAN+3 Macroeconomic Research Office (AMRO) raised its growth forecast for South Korea this year to 3.3 percent from 3.1 percent, marking the second consecutive upward revision since July. AMRO also lifted its outlook for next year by 0.5 percentage points, to 2.7 percent from 2.2 percent.

The revisions were published Monday in AMRO's updated Regional Economic Outlook report.

AMRO had initially projected South Korea's growth at 1.9 percent for both this year and next year in its April forecast. It then raised this year's estimate to 3.1 percent and next year's to 2.2 percent in its July update, and has now lifted each figure by a further 0.2 and 0.5 percentage points, respectively.

The latest update, however, did not include individual country assessments beyond the revised numerical forecasts.

Other international organizations have also been raising their outlooks for South Korea in quick succession. The Organization for Economic Cooperation and Development lifted its growth forecast for South Korea this year by 1.1 percentage points to 3.7 percent in its September interim outlook — the largest upward revision among G20 economies. The Asian Development Bank similarly raised its forecast by 0.6 percentage points to 3.2 percent in its September update.

AMRO's inflation forecasts for South Korea were mixed. The projection for this year was nudged up 0.1 percentage points to 2.7 percent from 2.6 percent, while the forecast for next year was trimmed by the same margin to 2.3 percent from 2.4 percent.

Among major economies, China's growth forecasts were left unchanged at 4.5 percent for both this year and next. Japan's outlook was raised to 0.9 percent from 0.6 percent for this year and to 1.0 percent from 0.8 percent for next year.

For the ASEAN+3 region as a whole, the growth forecast for this year was held at 4.1 percent, while the outlook for next year was raised 0.1 percentage points to 4.1 percent from 4.0 percent. AMRO said robust AI-related exports and rising investment demand are expected to partially offset the drag on domestic consumption from higher energy prices.

Regional inflation was forecast at 1.6 percent this year and 1.7 percent next year. The projection for this year was unchanged, while next year's estimate was raised 0.1 percentage points from 1.6 percent. AMRO said core inflation remains relatively stable but noted that rising global energy and food prices are likely to feed through with a lag.

AMRO nonetheless said downside risks to the ASEAN+3 regional economy are dominant. A slowdown in AI-related demand could weigh on regional exports and investment, it said. AMRO also said the Middle East conflict could push up energy, transportation and production costs, while extreme weather events could drive food prices higher.

AMRO identified additional risk factors including a potential correction in equity markets driven by technology stocks, rising bond yields in major economies, and abrupt shifts in expectations for US monetary policy. It also warned that further protectionist measures could raise trade costs and disrupt regional supply chains.

Over the longer term, AMRO flagged geoeconomic fragmentation, population aging and climate change as structural risks that could weigh on regional economies.