Ministry of Economy: "Inequality is Inevitable in Early Growth... Semiconductor Achievements Aim to Spread to Other Sectors"

A government official assessed that it is inevitable for certain industries to concentrate their achievements during the early stages of economic growth. He added that it is the government's role to spread the semiconductor-centered growth to other industries, consumption, and local businesses.

Lim Hong-ki, Director of Economic Analysis at the Ministry of Economy and Finance, stated on the 10th at the '2027 Economic and Financial Outlook Seminar' hosted by the Korea Financial Research Institute that the government's goal is to spread the semiconductor-centered growth to other sectors.

Director Lim explained that exports in sectors excluding semiconductors and information technology (IT) increased by 12.3% compared to the previous year until October this year. He further noted that there is typically a lag of about 3 to 4 quarters before the increase in corporate exports and profits translates into actual consumption, and thus he expects the growth achievements to spread to consumption and investments in other sectors next year.

Director Lim explained that the government is establishing its economic growth strategy for next year. The policy direction includes expanding new growth engines beyond semiconductors and ensuring that the income generated from the semiconductor boom circulates in the domestic economy, leading to local businesses and the livelihood economy. To this end, he mentioned that the government is promoting three major mega projects and seven seed projects, as well as preparing three major livelihood projects focused on housing, jobs, and financial support for the underprivileged.

Kim Young-joo, Head of the Macroeconomic Outlook Division at the Bank of Korea, assessed that the semiconductor boom could raise next year's economic growth rate. He expressed a personal view that the nominal value-added share of the semiconductor industry, which was around 10% in 2024, could exceed 20% this year. He explained that since this change in share is reflected in the calculation of real GDP, even if semiconductor production shows the same growth rate as in previous years, the effect of raising the overall economic growth rate could increase. However, he pointed out that if semiconductor prices adjust, the subsequent economic growth rate could also be significantly affected.

He also noted the possibility that the performance bonuses and wage increases of semiconductor companies could support domestic recovery as they spread to other industries. However, he analyzed that if the cost pressures from rising international oil prices are combined with income increases and demand pressures from domestic recovery, it could act as a factor for rising core prices. He emphasized the need to check the soundness of vulnerable sectors such as self-employed individuals and the risks of financial imbalances in the context of financial market volatility due to adjustments in AI infrastructure investment and high-interest rate situations.

On that day, Kim Hyun-tae, Head of the Macroeconomic Research Division at the Korea Financial Research Institute, projected this year's economic growth rate at 3.8% and the growth rate for 2027 at 3.1%. He analyzed that the economy would continue to grow at a rate of over 3% for two consecutive years, based on strong semiconductor exports and expanded facility investments. He presented that next year's private consumption growth rate would be 2.3%, facility investment growth rate would be 5.4%, and total export growth rate would be 5.2%. However, he pointed out that unlike semiconductors, a full recovery has not yet been confirmed in the service sector and non-semiconductor manufacturing. He explained that the semiconductor industry is capital-intensive and has a low employment inducement effect, so it takes time for the growth achievements to spread to the overall economy.

Private experts generally presented a positive outlook for next year's semiconductor market and the Korean economy.

Kwon Hyo-seong, a Bloomberg economist, predicted the growth rate of the Korean economy in 2027 to be in the mid-3% range. He analyzed that even if the tightening of regulations on data center construction in the U.S. and rising costs affect new projects, the demand for memory semiconductors due to ongoing projects could be maintained at least until 2027. However, he identified the pressure of rising oil prices due to the prolonged Middle East conflict and movements in long-term interest rates as risk factors that could burden AI investment.

Park Seok-gil, a JP Morgan economist, assessed that the changes in the semiconductor industry due to the spread of AI should be viewed as structural changes rather than simple economic cycles. He explained that since the level of economic indicators has changed due to the surge in semiconductor exports, it is difficult to judge the economic situation solely based on a slowdown in growth rates. He suggested that a large current account surplus could lead to structural expansions in facility investment, productivity improvements, and exports, analyzing that there are upside risks to the Korea Financial Research Institute's growth rate and facility investment forecasts for next year.

Jang Sang-sik, Head of the International Trade Research Institute at the Korea International Trade Association, pointed out the possibility that the rise in semiconductor prices could slow down. He explained that even a slight slowdown in the increase of data center investments could impact semiconductor prices. He projected that even if semiconductor companies have entered into long-term supply contracts, the price determination methods differ by contract, so the price increase effects seen this year may be alleviated in the next year and the year after. He also emphasized the need to prepare for trade pressures due to the strengthening of U.S. trade pressures against China and the expansion of Korea's trade surplus.