[Monetary Policy Poll]② Exchange Rate Is the Biggest Variable for Rate Decision... "Semiconductors Will Drive Korea's Growth Again This Year"

Asia Business Daily Survey of 13 Domestic and International Economic Experts
Most Predict 1.8% Growth for Korea This Year... 45% Say "It Will Exceed 2%"
Exchange Rate and Inflation Seen as Key Variables for Rate Decisions
"Government Must P

Ahead of the Bank of Korea’s first base rate decision of the year on January 15, the majority of domestic experts expect South Korea’s economic growth rate to exceed 1.8% in 2026. They cited the base effect from last year’s growth rate, which hovered around 1.0%, and anticipated that the semiconductor sector will play a major role in driving export performance and supporting the recovery. The government’s expansionary fiscal stance is also expected to strengthen growth momentum. As for the key variable in the Bank of Korea’s monetary policy, most experts pointed to the ‘exchange rate.’ Many believe that, despite government intervention, the continued rise of the won-dollar exchange rate means the government’s top priority should be ‘stabilizing the foreign exchange market.’

Most experts expect growth of ‘above 1.8%’ this year... 45% forecast ‘over 2%’

According to a survey conducted by The Asia Business Daily from January 6 to 9, 2026, targeting 13 economic experts from domestic and international research institutes, securities firms, and banks, all respondents (11, with 2 non-responses) projected that South Korea’s economic growth rate will exceed 1.8% this year. Specifically, four experts forecast 1.8% growth, matching the Bank of Korea’s November 2025 projection, while two predicted 1.9%. Among the respondents, 45% (five experts) anticipated ‘growth above 2%.’ Two experts forecast 2.0%, the same figure cited by President Lee Jaemyung on January 9. One expert predicted 2.1%, and two projected 2.2%.

Experts cited ‘robust exports led by semiconductors’ as the main reason for the rebound in this year’s growth rate. Despite concerns over export slowdowns due to U.S. tariff hikes, they believe the semiconductor sector, now in a supercycle, will continue to drive export performance in 2026. In addition, the government’s expansionary fiscal stance and the base effect from last year’s low growth rate are also seen as factors boosting growth. Kim Seongsu, a researcher at Hanwha Investment & Securities, who forecast 2.1% growth, pointed to the ‘prolonged semiconductor cycle’ as the reason. Yoon Yeosam, a researcher at Meritz Securities, also raised his growth forecast from 2.0% to 2.2%, stating, “Strong exports and government-led growth momentum are being firmly maintained.”

However, some experts warned that a ‘K-shaped recovery (widening polarization)’ could limit the rise in the growth rate. Paek Yunmin, a researcher at Kyobo Securities who forecast 1.8% growth, said, “Excluding semiconductors, there is significant uncertainty in other industries. It remains to be seen whether the above-base growth effect can be sustained.” An Yeha, a researcher at Kiwoom Securities, also predicted 1.9%, stating, “Achieving 2% growth will be difficult due to the K-shaped recovery.”

Han Junhee, a senior researcher at NH Financial Research Institute who forecast 1.8% growth, said, “If the high exchange rate persists, there could be some positive effects on net exports. However, changes in global demand for key industries, the pass-through of higher costs due to the strong exchange rate, and delayed domestic demand recovery are risk factors that could constrain overall economic growth momentum.”

For this year’s consumer price inflation, the majority (six experts) expect it to remain in the low 2% range (2.0-2.2%), close to the Bank of Korea’s forecast of 2.1%. Kang Minju, Chief Economist at ING Bank, said, “The inflationary impact of the weak won will be offset by falling international oil prices. If inflation accelerates, the government is expected to respond by strengthening price stabilization policies.” Expert forecasts ranged from a low of 1.7% to a high of 2.3%, a gap of 0.6 percentage points. Yoon, who forecast 2.3%, explained, “Despite stable energy prices, a higher-than-expected exchange rate is increasing import price pressures, and after the local elections in June, public utility rate hikes could maintain inflationary pressure.”

‘Exchange rate’ cited as the top variable for rate decisions... “Government’s top priority should also be stabilizing the foreign exchange market”

All experts surveyed expect the base rate to remain unchanged this month, with many citing the persistently high exchange rate as the biggest variable for the Bank of Korea’s future monetary policy. Eight out of 11 respondents (multiple responses allowed) pointed to the exchange rate. Five cited ‘inflation,’ which had not previously been considered a major variable, and five mentioned real estate prices. Rising exchange rates, inflation, and property prices are all factors that restrict rate cuts. Han Junhee, Senior Researcher, said, “Cutting rates in a high-exchange-rate environment could trigger capital outflows and further upward pressure on the exchange rate, significantly limiting the scope for monetary policy. If inflationary pressure increases, the conditions for a rate cut will also be weakened.” Paek also noted, “At this point, the focus of monetary policy is more on financial stability risks than on fundamentals. The stability of these factors will be the most important variable in determining the direction of future monetary policy.”

Three experts cited export performance, including semiconductors, as a variable. An Yeha said, “If the trickle-down effect from improved export conditions strengthens, the base rate could remain unchanged for an extended period, or even be raised.” However, Kang, the Chief Economist, cautioned, “The fact that Korea’s economic recovery relies heavily on the semiconductor cycle could be a double-edged sword for the future growth path.” Yoon, who cited U.S. monetary policy as a variable, said, “Ahead of the U.S. midterm elections in November, aggressive policy moves by the Trump administration could increase fiscal uncertainty. This could, in turn, heighten the risk of U.S. interest rate hikes.”

Most experts also identified stabilizing the foreign exchange market as the government’s top policy priority this year. Five out of 10 respondents (multiple responses allowed) said efforts to stabilize the exchange rate and the broader foreign exchange market should come first. Kim noted, “If exchange rate pressures persist, both inflation and growth could be directly affected.” Han also emphasized, “In a period of significant external uncertainty, exchange rate volatility could spread instability throughout the financial markets. With large-scale U.S.-related investments linked to trade agreements on the horizon, changes in capital flows and foreign currency supply and demand could add further volatility to the exchange rate. The government must prioritize ensuring that the implementation of these investments does not result in excessive shocks to the foreign exchange market.”

This year, some experts also called for the implementation of future industry development (four experts) and structural reforms (two experts). Heo Moonjong, Head of the Woori Financial Management Research Institute, said, “To overcome low growth and address polarization, the development of future industries and structural reforms in areas such as labor and education must be pursued together.” Ahn Jaegyun, a researcher at Korea Investment & Securities, also noted, “The most important issue this year will be reversing the roughly 20-year downward trend in potential growth.” Kang, the Chief Economist, who cited addressing economic polarization as a priority, pointed out, “If economic polarization continues, it could constrain the use of macroeconomic policy.”

Experts who participated in the survey (in alphabetical order)

Kang Minju, Chief Economist at ING Bank; Kang Seungwon, Researcher at NH Investment & Securities; Kim Seongsu, Researcher at Hanwha Investment & Securities; Moon Hongcheol, Researcher at DB Securities; Park Sanghyun, Researcher at iM Securities; Park Seokgil, Economist at JP Morgan; Paek Yunmin, Researcher at Kyobo Securities; An Yeha, Researcher at Kiwoom Securities; Ahn Jaegyun, Researcher at Korea Investment & Securities; Yoon Yeosam, Researcher at Meritz Securities; Jeong Seongtae, Researcher at Samsung Securities; Han Junhee, Senior Researcher at NH Financial Research Institute; Heo Moonjong, Head of Woori Financial Management Research Institute