The preliminary estimate for 2Q GDP came in slightly stronger than expected. On a QoQ annualized basis, the economy expanded by 2.5% in 2Q, moderating from 7.5% in 1Q. On a YoY basis, GDP growth was broadly steady at 3.7%, compared with 3.8% in 1Q. Exports of goods and services remained the main driver of growth, rising 9.0% yoy. Gross fixed capital formation increased a moderate 2.5%, while private consumption also grew by a moderate 2.5%.
We are revising up our 2026 GDP growth forecast to 3.5% from 2.6%, and our 2027 forecast to 2.4% from 2.0%. The upward revision primarily reflects a higher starting point, which lifts the overall growth trajectory. Looking ahead, we expect AI-related exports and investment to continue supporting activity, with the gains likely to be reflected more in nominal than real GDP over the coming quarters, owing to higher semiconductor export prices.
We continue to expect the Bank of Korea to deliver an additional 50bps of rate hikes over the remainder of the year, following the 25bps increase in July, bringing the policy rate to 3.25% by year-end. In our view, the BOK will remain focused on the strength of nominal GDP, as it provides a clearer signal of how export revenues are feeding through to corporate profits, wage growth, and ultimately consumer price inflation.
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