NH Forecasts 1.9% Growth for Korea Next Year...AI Investments to Boost Semiconductor Exports

NH Investment & Securities has forecast that South Korea's economic growth rate will reach 1.9% next year. The company expects that investments in artificial intelligence (AI) will drive an expansion in semiconductor and related infrastructure exports, leading to an improvement in the output gap between real gross domestic product (GDP) and potential GDP.

An Kitae, a researcher at NH Investment & Securities, presented this outlook for next year's economic growth rate in the report "2026 Economic Outlook: The Whip Effect of Innovation," released on November 18. He cited improvements in semiconductor inventories, the output gap, and increased fiscal capacity as the main reasons. The growth rate projection for this year was set at 1.0%.

First, An noted, "Currently, the ratio of shipments (sales) to inventory in the Korean semiconductor sector is at its highest level since statistics began in 1980," adding, "There is a possibility that either sales prices will rise or production will increase in the future." He also said, "While there is a chance that the shipment-to-inventory ratio may decline, given the current high level, the drop in the semiconductor export growth rate is not expected to be significant."

Additionally, An highlighted the improvement in the output gap, stating, "For a considerable period, South Korea's GDP lagged behind its potential GDP, but after 2025, changes have occurred in the Korean economy. While fiscal spending has normalized, exports of semiconductors and AI-related infrastructure have increased." He predicted, "Although the timing is later than in the United States, the negative output gap in Korea will narrow in a similar pattern."

Finally, fiscal capacity is also expected to expand next year. An explained, "If the net profits of Samsung Electronics and SK Hynix increase, the government's corporate tax revenue will rise the following year," and added, "With semiconductor exports expected to increase in 2025, government corporate tax revenues should rise in 2026."

The United States is also expected to see AI-driven growth in 2026. An stated, "Currently, AI-related investment accounts for 1.5% of U.S. GDP," noting that, "This is closer to the level of 1995-1996, rather than the 2.2% seen in 2000 when the IT sector faced overinvestment. With high-yield bond maturities concentrated around 2028, AI-driven growth is expected to continue through 2026." He projected the U.S. growth rate for next year at 2.0% on an annualized basis.

Considering the capital expenditure outlook for big tech companies, An predicted that the share of AI-related investment relative to U.S. gross domestic income (GDI) will reach 2.0% by 2028. He also emphasized, "The intangible assets (AI) of the United States require the tangible assets (semiconductors) of South Korea." He further noted, "With manufacturing inventory ratios relative to GDP declining in both the United States and South Korea, and with the share of corporate profits and the scale of economic stimulus relative to U.S. GDP at historic highs, global orders for capital goods are expected to increase."

In addition, he projected growth rates of 4.6% for China, 1.4% for Europe, and 2.8% for the world as a whole.

This content was produced with the assistance of AI translation services.