Seoul: An Asia-based economic surveillance organization announced on Monday that South Korea's economy is anticipated to grow by 1.9 percent this year, bolstered by robust semiconductor demand and government stimulus expenditure.

According to Yonhap News Agency, the ASEAN+3 Macroeconomic Research Office (AMRO) has retained its previous growth projection from December, as confirmed by the Ministry of Finance and Economy. For 2026, AMRO predicts that South Korea's real gross domestic product (GDP) will recover from a 1 percent growth rate in 2025, driven by consistent semiconductor demand and the government's supplementary budget initiatives.

However, AMRO has adjusted its inflation forecast for this year upwards to 2.3 percent from 1.9 percent, attributing this change to recent hikes in global energy prices. The surge in global oil prices follows U.S.-Israeli military actions in Iran, which have effectively closed the Strait of Hormuz and disrupted global oil supplies. South Korea, which imports nearly 98 percent of its crude oil supplies primarily from the Middle East, is particularly affected.

The organization cautioned that South Korea's external sector is facing increasing challenges, with potential downside risks and elevated uncertainty looming, as noted by the ministry. While demand for investment, driven by advancements in artificial intelligence (AI), could support economic growth, a possible deceleration in AI development and the potential reimplementation of U.S. tariff measures might negatively impact the economic outlook.

AMRO also highlighted the risks posed by rising global energy prices and prolonged disruptions in regional energy supply to both economic growth and inflation. Looking forward, the organization emphasized the necessity for adaptable policy responses in the face of heightened uncertainty. It suggested that Seoul authorities should employ a data-driven and adaptive strategy, coordinating fiscal and monetary policies to effectively respond to shocks and sustain growth momentum.

The Singapore-based AMRO was founded in 2011 with the aim of promoting macroeconomic and financial stability in the Asian region, which includes the 10-member Association of Southeast Asian Nations (ASEAN) and its three Northeast Asian partners-South Korea, China, and Japan.