The Korea Development Institute (KDI), a government-funded research institute, has adjusted its economic growth forecast for South Korea to 1.9% for the year, reflecting a slight increase of 0.1 percentage points from previous estimates. This adjustment is based on anticipated improvements in exports and private consumption driven by a buoyant semiconductor market, fueled by increasing investments in artificial intelligence (AI). The KDI's estimates align with those of the International Monetary Fund (IMF) but differ from the government's more optimistic outlook of 2.0% and the predictions made by the Bank of Korea and OECD.

KDI highlights the 'supercycle' in the semiconductor sector, which has seen predicted global memory semiconductor trading growth rates more than double from 17.8% to 39.4% in just three months. This surge is expected to lead to a 2.1% rise in exports, compared to a previous outlook of 1.3%, and a 1.7% increase in private consumption, up from last year's 1.3%. Furthermore, facility investments are projected to grow by 2.4%, buoyed by the substantial increase in semiconductor-related investments, although excluding semiconductors, growth remains modest.

Conversely, the report raises concern about the construction investment sector, which is directly linked to domestic economic performance. The KDI has drastically cut its growth forecast for construction investments to 0.5%, significantly down from earlier estimates. The outlook also deviates starkly from the government's previous forecast of 2.4%. The KDI's macroeconomic policy head, Jeong Yu-cheol, indicated that this slowdown is indicative of both cyclical challenges and deeper structural issues, particularly noting how population decline in regional areas is adversely impacting construction investment.