South Korea Economics: We Raise Our 2026E-28E GDP with Resilient April-May data and Strong CAPEX plan

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South Korea Economics: We Raise Our 2026E-28E GDP with Resilient April-May data and Strong CAPEX plan

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29 Jun 2026 21:03:08 ET │ 11 pages

South Korea Economics

We Raise Our 2026E-28E GDP with Resilient April-May data and Strong

CAPEX plan

CITI’S TAKE

We now raise our 2026E GDP by 0.4ppt to 3.5% mainly due to

surprisingly resilient April-May hard data and a potential second fiscal

stimulus (KRW25trn or above by early September’26) including

infrastructure investment for the tech CAPEX plan. We also revise up our Jin-Wook KimAC

2027E-2028E GDP by 0.2ppt each to 3.0% and 2.5%, respectively, +82-2-2077-4229

mainly due to the strong tech CAPEX plan as well as potential long-term jinwook.kim@citi.com

agreements between semiconductor producers and buyers. We could see

a mix of expansionary fiscal policy and tightening monetary policy in

2H26–2027.

On June 29th, the government announced three mega projects at around

KRW1,500trn for the coming decade (Yonhap News, June 29th). In our view, one of

newly incremental CAPEX parts would be the KRW800trn semiconductor CAPEX

plan for the southwest region over 15 years, implying a KRW53trn potential CAPEX

upside risk per year. We assume a relatively low domestic value-added inducement

coefficient (0.3) given the import requirement of chip manufacturing equipment. In

the early phase, the positive impact of investment could be larger, as the greenfield

type of construction investment (including infrastructure investment) is likely to be

required. For annual implementation, we roughly assume a KRW25trn-KRW50trn

range given uncertain schedule. In conclusion, the extra KRW25trn-50trn CAPEX

per year could potentially raise annual GDP growth by +0.28ppt ~ +0.57ppt over a

year, in our rough estimates.