Korea Market Outlook Update

Crédit Agricole forecasts a rebound in South Korea's 2026 GDP to 2.6%, supported by record fiscal spending and a strong AI-driven semiconductor cycle. However, the BOK is expected to hike rates twice in H2 2026 to combat inflation.

Key Takeaways

• 1.South Korea's GDP growth is forecast to jump to 2.6% in 2026 from 1.0% in 2025, driven by semiconductor exports and expansionary fiscal policy.
• 2.The Bank of Korea (BOK) is expected to implement two 25bp rate hikes in Q3 and Q4 2026 to stabilize inflation and household debt.
• 3.Korean Treasury Bonds (KTBs) will be phased into the FTSE WGBI over eight months starting April 2026, supporting passive inflows.

Table of Contents

• Korea: GDP growth to move back above 2% again
• Korea: exports supported by strong global AI chip cycle
• Korea: government's expansionary policy to support growth
• Korea: BOK expected to hike in Q3 and Q4
• Korea: higher KTB yields
• Korea: WGBI inclusion to continue
• Korea: beneficiaries of the WGBI inflows
• Korea: a new paradigm for the KRW?
• Korea: 2026 major events to watch

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