The Korea Development Institute in a report released on May 13 raised its economic growth forecast for this year from 1.9% to 2.5%. Shown is Moon of Seoul, a helium-powered balloon floating over the Yeouido financial area of Seoul's Yeongdeungpo-gu District. (Seoul Metropolitan Government)

By Lee Dasom

The Korea Development Institute (KDI) has raised its economic growth forecast for this year from 1.9% to 2.5%, citing continued improvements thanks to the semiconductor boom and rising domestic demand.

In an economic outlook for the year's first half released on May 13, the think tank set a prediction of 2.5% growth for the year. "As recovery in consumption continues, facility investment is improving led by semiconductors and sluggishness in construction investment is also easing," it added.

The report also predicted a record-high current account surplus of USD 240 billion this year and USD 210 billion next year thanks to brisk semiconductor exports.

Private consumption was expected to show recovery in rising 2.2% this year and 1.5% next year despite inflation caused by the war in the Middle East, driven by improved income and government support policies.

The KDI projected inflation of 2.7% this year due to the impact of higher international oil prices but 2.2% next year as such costs stabilize.

"We need to prepare monetary policy to prevent inflation forecasts from becoming unstable given domestic and external uncertainties," the report added. "Fiscal policy needs to focus spending on boosting potential growth and supporting income-vulnerable groups, while also maintaining efforts to improve spending efficiency."

dlektha0319@korea.kr