South Korea: 2Q26 Advance GDP: Strong, Well-Balanced Growth Dynamic

Research evidence excerpt

South Korea: 2Q26 Advance GDP: Strong, Well-Balanced Growth Dynamic

Update

Exhibit 3 : A balanced growth contributionMUpside materializing for 2026 GDP growth to reach the mid-3% level: Headline

from both domestic and external accounts

GDP growth for 2026 now looks set to jump to the mid-3% level, a meaningful lift

Real GDP, YoY ppt contribution by expenditure account

versus our current forecast of 2.8%. Assuming 2H26 sequential growth averages Private consumption Government expenditure Construction investments

Facilities investments Net exports Intellectual property

approximately 0.1%Q, which we view as a conservative assumption given the 7 Change in stocks GDP, %Y

moderation we typically see as base effects normalize, full-year growth could settle 5

at 3.5-3.7%. 3

Against this backdrop, we expect the BoK to lift its growth forecast significantly at -1

the August meeting, from its current 2.6% projection set in May. BoK Governor Shin -3

has already signaled that the 2.6% forecast is "too low" and would likely be raised -5 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 2Q25 3Q25 4Q25 1Q26 2Q26

significantly in August, stating he expects growth to "considerably exceed" its May Source: Bank of Korea, Morgan Stanley Research

forecast. Given the BoK's firm data-dependent stance, Governor Shin said after the

July hike that "the next several policy meetings are all live" and that the BoK will

"base our decisions on the incoming data", the strong 2Q26 GDP print materially

lowers the bar for a possible rate move in August.

At the same time, the coming July CPI inflation print likely shows a moderation in

the headline figure without a sharp rise given the drop in the oil price early in the

month; coupled with the stable FX level and considering the nature of the slow