SEOUL, 27th May, 2026 (WAM) -- South Korea's economy will likely grow at a sharper-than-expected pace of 2.5% this year thanks to strong exports, mainly led by the semiconductor industry, a state-run think tank said.

The revised projection by the Korea Institute for Industrial Economics & Trade (KIET) represents a 0.6 percentage-point increase from its previous estimate of 1.9% growth presented late last year.

Despite energy supply volatility caused by the U.S.-Israeli war against Iran, the think tank said it made an upward revision considering a continued increase in exports and investment sparked by the strong performance of the semiconductor and IT sectors, and the government's expansionary fiscal policy.

South Korea's yearly exports will likely reach an all-time high of US$924.4 billion in 2026, rising more than 30% from last year, on the back of rising demand for semiconductors and ICT products for artificial intelligence (AI) infrastructure, the KIET said, according to Yonhap. The country's yearly exports surpassed the $700 billion mark for the first time in 2025.

With record exports, the country is expected to enjoy an unprecedented trade surplus of $220 billion this year, it added.

"Investment and export growth driven by the AI and semiconductor industry has turned out to be stronger than expected ... and we had expected effects of U.S. tariff policy to become visible this year, but they have not materialized as strongly as anticipated," KIET President Kwon Nam-hoon said.