Seoul: With global economic uncertainties looming over Asia's fourth-largest economy in 2026, South Korea is set to navigate these challenges by capitalizing on its burgeoning semiconductor industry amid a global rise in artificial intelligence (AI), experts revealed.
According to Yonhap News Agency, the South Korean economy has faced significant hurdles earlier this year following a series of protectionist measures announced by U.S. President Donald Trump, including tariffs targeting long-standing economic allies. However, a breakthrough occurred in November when Seoul and Washington agreed to reduce reciprocal tariffs on South Korean products to 15 percent from 25 percent, in exchange for South Korea's commitment to invest US$350 billion in the United States.
Subsequently, the Bank of Korea adjusted its 2026 growth forecast to 1.8 percent, up from an earlier prediction of 1.6 percent, citing a robust recovery in the global semiconductor market. The ASEAN+3 Macroeconomic Research Office (AMRO) has also projected a 1.9 percent expansion in South Korea's economy for the upcoming year, fueled by strong exports.
In November, South Korea's exports surged 8.4 percent year-on-year to over $61 billion, marking a six-month streak of growth. Cumulative exports for January to November reached $640.2 billion, setting a record for the first 11 months of a year and raising expectations for annual exports to surpass $700 billion for the first time.
Despite these optimistic projections, challenges persist for South Korea, including foreign exchange volatility and intensifying competition from Chinese rivals. Joo Won, an economist at Hyundai Research Institute, emphasized that while the economy might achieve a 1.8 percent growth, it is largely due to the challenging conditions faced this year. He also highlighted the potential impact of the weak Korean won, which was recently quoted at 1,483.6 won per dollar, nearing its weakest level since 2009.
Joo anticipates that while the foreign exchange market will remain volatile in the first quarter of 2026, it is expected to stabilize by the second quarter. Meanwhile, Choe Byung-ho, an economics professor at Pusan National University, highlighted the need for long-term government strategies to boost productivity, as domestic demand remains weak and inflation unstable.
Choe suggested leveraging the global AI boom by increasing investment in the sector. Park Jea-gun, a distinguished professor of electronic engineering at Hanyang University, noted the semiconductor industry's expected strength in 2026, driven by demand for premium chips like high bandwidth memory (HBM) from the AI sector. Despite potential supply shortages, Park dismissed concerns of an AI bubble, emphasizing the trend's role in driving major social change.
Park underscored the importance of government support in building new semiconductor production lines, especially amid energy shortages. In response to China's rising manufacturing prowess, experts recommend that South Korean firms enhance competitiveness by focusing on quality over price.
Jin Ok-hee from the Korea International Trade Association (KITA) advises South Korean companies to differentiate their exports by creating high-value products and combining hardware with AI for comprehensive solutions. Jin also suggests that the chemical and steel industries pursue non-price competition by adhering to global environmental standards, while the machinery sector should focus on high-precision products.