Korea’s economy rebounded in 2025. The recovery has been underpinned by a rebound in private consumption, owing largely to the resolution of political gridlock and fiscal stimulus. Exports, particularly semiconductors, have provided additional momentum. Construction investment, however, remains a drag, mired in real estate project finance distress. Growth is projected to rise to 1.9 percent in 2026, gradually narrowing the negative output gap.
In addition, inflation has remained well-anchored near the Bank of Korea’s 2 percent target, due to less volatile food prices and muted energy prices. Looking ahead, inflation is forecast to remain stable, averaging around 1.9 percent in 2026.