Hyundai Research Institute raised its forecast for Korea's economic growth rate this year to 1.0%. That is 0.3 percentage point (p) higher than the 0.7% forecast in April.
On the 14th, the institute released a report titled "Korea's economy in 2026: Is the end of the dark, long tunnel in sight?" and presented this year's gross domestic product (GDP) growth outlook for Korea at 1.0%.
The institute said, "In the second half of this year, active fiscal policy by the government and a recovery in economic sentiment created momentum for a turning point," adding, "Exports are also performing better than expected."
The growth outlook for next year was set at 1.9%. This is close to the potential growth rate level (around 2%). The institute projected a "high early, low later" pattern, with growth of 2.3% year over year in the first half and 1.5% in the second half.
The institute viewed positively that recovery signals are being detected in the domestic institutional sector. The private consumption growth rate is expected to expand from 1.3% this year to 1.7% next year. The institute analyzed that improved consumer sentiment, easier financial conditions, and an increase in household disposable income will support consumption capacity.
Construction investment, which has been in contraction for the fifth year, also appears likely to turn positive next year. The outlook is for a rebound from -7% this year to 2.6% next year.
Joo Won, head of economic research at Hyundai Research Institute, said, "As the domestic growth trend recovers, the economy will continue to return to normal levels."
However, exports and facility investment were still cited as risk factors. The institute warned that if trade pressure from the Trump administration persists and export conditions are weaker than expected, the country's key industries could face an "investment cliff." The export growth rate is expected to fall further, from -0.6% this year to -1% next year.
The facility investment growth rate is also expected to slow from 1.8% this year to 1.5% next year. Corporate sentiment remains below the long-term average (100 points), and deteriorating trade conditions are cutting exports, reducing the incentive to expand production facilities.
The institute said that to seize the opportunity for a recovery, monetary policy needs to be managed in line with the expansionary stance of fiscal policy. Joo Won, head of economic research at Hyundai Research Institute, said, "To seize the opportunity for a recovery, the expansionary stance of fiscal policy and monetary policy must be in harmony."