South Korea revised its economic growth forecast sharply higher, as booming global demand for artificial intelligence (AI) drives its semiconductor exports to record levels.

The government sees gross domestic product (GDP) expanding 2.6% this year, an upward revision from its previous forecast of 2.2%, according to a statement on Wednesday from the Finance Ministry. The inflation forecast has been kept unchanged at 2.6%, matching an estimate by the Bank of Korea (BOK).

The government forecast for GDP is 0.1 percentage point higher than the one by the BOK, which also revised its projection in May, after the economy expanded faster than expected in the first quarter. A jump in memory-chip sales by companies including SK Hynix Inc propelled the economy to a 1.3% expansion from a quarter earlier, far outpacing the 0.6% consensus forecast of economists.

The pickup in economic projections underscores optimism about an economy that has bounced back from last year’s slump in semiconductor demand, even as interest rates have stayed elevated. The government said on Monday South Korea exported the most semiconductors on record in June, driving the nation’s trade surplus to US$8 billion , the largest since 2020.

South Korea now expects its current account surplus to reach US$63 billion this year, up from US$50 billion forecast previously, the Finance Ministry said. That would be a jump from US$35.5 billion last year.

Meanwhile, the government remains concerned about a slow recovery in private consumption and persistent credit risks in the construction industry, the ministry statement said. While facilities investment will likely rebound in sectors related to exports, funding in construction is likely to stay weak, it said.

  - Bloomberg