Global investment banks raise S.Korea’s growth forecasts as trade tensions with US ease

Global investment banks are revising up their growth forecasts for South Korea, citing easing trade uncertainties and signs of a consumer-led recovery, in a shift that contrasts with the more cautious outlook of domestic policymakers.

Goldman Sachs, JPMorgan and Citi are among those raising expectations for this year and next, as recent trade and tariff negotiations between Seoul and Washington have reduced uncertainty over key export items such as semiconductors.

According to data compiled by the Korea Center for International Finance, the average 2025 GDP growth forecast from eight global investment banks has risen to 1.0%, up from 0.8% in May and breaking above the 0% to 0.9% range for the first time in four months, when global demand weakened and domestic consumption faltered.

Goldman Sachs now expects the Korean economy, Asia’s fourth largest, to grow 1.2% this year, up 0.1 percentage point from its previous forecast.

“The latest trade deal announcement has eased tariff-related uncertainties on key exports,” the US investment bank said in a research note, adding that “Korea is not at a comparative disadvantage versus other countries” under the new US terms.

FISCAL STIMULUS TO OFFER CUSHION

JPMorgan, long one of the more bearish observers of the Korean economy, also nudged up its forecast to 0.7% from 0.6%, citing stronger-than-expected second-quarter growth.

Citi raised its forecast to 0.9% from 0.6%.

“Export momentum and manufacturing gains pushed Korea’s second-quarter GDP growth to 0.6%, slightly above consensus,” JPMorgan said in a client note. “While there may be some payback in the third quarter, fiscal stimulus should provide a cushion.”

Some other banks held their 2025 forecasts steady. UBS expects Korea’s economy to grow 1.2%, while Barclays and HSBC offered growth rates of 1.1% and 0.7%, respectively. Both Bank of America Merrill Lynch and Nomura expect 1.0% growth.

Looking ahead to 2026, Goldman Sachs, JPMorgan and Citi all raised their outlooks by 0.1 percentage point.

Goldman sees Korea expanding 2.2% next year – the most optimistic projection among the eight global banks – while Citi and JPMorgan expect growth of 1.6% and 2.0%, respectively.

ROSIER VIEW THAN BOK, DOMESTIC RESEARCHERS

These upgrades outpace the projections of Korea’s central bank and other major domestic institutions.

The Bank of Korea, in its May forecast, predicted growth of just 0.8% this year and 1.6% next year, in line with the estimates of the Korea Development Institute and the Asian Development Bank.

But analysts expect the BOK to raise its forecasts later this month in response to improving data and external demand.

Write to Jin-gyu Kang at josep@hankyung.com

In-Soo Nam edited this article.