Home > Business > Economy

KDI sees continued gradual growth for 2025 and beyond

Published: 11 Nov. 2025, 20:13 Updated: 11 Nov. 2025, 20:28

People shop at a market in Seoul on Nov. 3. [YONHAP]

The Korea Development Institute (KDI) forecast Tuesday that Korea’s economy will grow 0.9 percent in 2025 and 1.8 percent in 2026, citing a gradual recovery in domestic demand supported by expansionary fiscal policies and a rebound in the semiconductor industry.

The projections mark slight increases from KDI’s August outlook of 0.8 percent and 1.6 percent, respectively.

“The semiconductor industry has been performing much better than expected this year, and we believe the recovery will continue into 2026,” said Jung Kyu-chul, head of KDI’s Macroeconomic and Financial Policy Department. “The government’s larger-than-expected budget also contributed to the upward revision.”

KDI said domestic demand will continue to recover as the government rolls out measures to boost consumption, even though the construction sector remains sluggish.

Total consumption is projected to grow 1.6 percent in 2025 and 2.0 percent in 2026, up from 1.4 percent in 2024. Private consumption is forecast to rise from 1.1 percent in 2024 to 1.3 percent in 2025 and 1.6 percent in 2026.

Facility investment is expected to grow 2.5 percent in 2025 and 2.0 percent in 2026, while construction investment is projected to fall 9.1 percent next year before rebounding 2.2 percent in 2026.

Exports are forecast to increase 4.1 percent in 2025 and 1.3 percent in 2026. KDI noted that semiconductor exports will drive moderate growth next year, but warned that a global economic slowdown and trade tensions may curb export momentum in 2026.

Jung Kyu-chul, head of KDI’s Macroeconomic and Financial Policy Department, right, and Kim Ji-yeon, chief economist at KDI’s Economic Outlook Office, present the institute’s 2025 second-half economic outlook at the Ministry of Economy and Finance complex in Sejong on Nov. 11. [YONHAP]

The current account surplus is expected to slightly narrow from $115.9 billion in 2025 to $103.7 billion in 2026.

Employment and inflation are expected to remain stable. The number of employed people will rise by about 170,000 in 2025 and by 150,000 in 2026. Consumer prices are forecast to increase 2.1 percent in 2025 and 2.0 percent in 2026, easing from 2.3 percent this year, though the institute cautioned that a weaker won could push inflation above the Bank of Korea’s 2.0 percent target.

KDI pointed to U.S. tariff policies and trade uncertainty as key risk factors. “Despite progress in the Korea-U. S. trade agreement, lingering legal issues in the United States and uncertainty over tariff rates on key export items remain,” the report said, warning that a U.S. Supreme Court ruling could sharply increase trade-related risks.

The institute concluded that lower market interest rates and expansionary fiscal spending will continue to support consumption, while accumulated construction orders are expected to translate into investment later down the road. “Although exports may slow, domestic demand will likely sustain a modest economic recovery,” it said.

By quarter, KDI projects growth of 0.3 percent in the first half of 2025, 1.5 percent in the second half, 2.1 percent in the first half of 2026 and 1.6 percent in the second half.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY JEONG JAE-HONG [[email protected]]