Economy June 30, 2026 04:50 AM

Citi raises South Korea growth outlook, citing fiscal stimulus and tech capex

Upgrades to 2026-28 GDP forecasts reflect strong April-May data and a planned KRW25 trillion-plus stimulus focused on infrastructure and technology

By Ajmal Hussain
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Citi has lifted its GDP forecasts for South Korea across 2026-28, citing resilient economic indicators in April and May and a potential second fiscal stimulus package of KRW25 trillion or more expected by early September 2026. The bank sees the package - including infrastructure investment tied to a technology capital expenditure plan - as the main driver behind the upward revisions.

Citi raises South Korea growth outlook, citing fiscal stimulus and tech capex
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Key Points

  • Citi raised 2026 GDP forecast by 0.4 percentage points to 3.5% citing resilient April-May hard data and an expected fiscal package.
  • 2027 and 2028 forecasts were raised to 3.0% and 2.5% respectively, linked to a technology capital expenditure plan and possible long-term semiconductor agreements.
  • Infrastructure and technology sectors are the primary areas expected to see increased government spending and market impact.

Overview

Citi has updated its outlook for South Korea's economic expansion, raising growth forecasts for 2026, 2027 and 2028. The bank increased its 2026 GDP forecast by 0.4 percentage points to 3.5%, a move it attributes to stronger-than-expected hard data observed in April and May and to an anticipated second fiscal stimulus package valued at KRW25 trillion or more, expected by early September 2026.

Details of the revisions

The revision for 2026 reflects two factors Citi highlights explicitly: the resilience of recent hard economic data and the prospect of a substantial fiscal package. That stimulus is expected to include infrastructure spending that supports a technology capital expenditure plan.

Alongside the 2026 upgrade, Citi raised its 2027 GDP projection by 0.2 percentage points to 3.0% and its 2028 forecast by 0.2 percentage points to 2.5%. The firm links these upward adjustments to the anticipated technology capital expenditure plan and to the possibility of long-term agreements between semiconductor producers and buyers.

Policy mix and outlook

Citi notes the potential for a policy mix in South Korea in the second half of 2026 and through 2027 that combines expansionary fiscal policy with tightening monetary policy. The revised forecasts incorporate expectations of increased government spending on infrastructure and technology sectors over the next two years.


Key points

  • Citi raised its 2026 GDP forecast by 0.4 percentage points to 3.5% based on resilient April-May hard data and a likely fiscal package.
  • Forecasts for 2027 and 2028 were increased to 3.0% and 2.5%, respectively, with revisions tied to technology capex and potential long-term semiconductor supply agreements.
  • Sectors most directly affected include infrastructure and technology, with implications for semiconductor-related markets.

Risks and uncertainties

  • The timing and delivery of the second fiscal stimulus package remain a point of uncertainty, even though Citi expects it by early September 2026.
  • The coexistence of expansionary fiscal policy and monetary tightening in H2 2026 through 2027 introduces policy-mix risk that could influence financing conditions for infrastructure and tech projects.

Conclusion

Citi's upward revisions for South Korea's GDP through 2028 center on stronger recent data and an anticipated fiscal effort concentrated on infrastructure and technology capital expenditure. The bank also flags the potential interaction between fiscal expansion and monetary tightening as a relevant uncertainty for the period ahead.

Risks

  • Uncertainty over the timing and implementation of the second fiscal stimulus package expected by early September 2026 - impacts infrastructure and tech spending.
  • Potential policy-mix risk from simultaneous expansionary fiscal policy and tightening monetary policy in H2 2026 through 2027 - affects financing conditions for projects in affected sectors.

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