ISSUE BRIEFING

Why KDI Raised 2026 Growth to 3.2% While Lowering Employment Forecast to 110,000

On August 19, KDI raised its 2026 economic growth forecast from 2.5% to 3.2% (+0.7 percentage points), while simultaneously lowering the projected increase in employment from 170,000 to 110,000 (-60,000). Of the 0.7 percentage point upward revision, 0.6 percentage points came from the semiconductor effect, driving up exports (+4.1 percentage points), facility investment (+4.6 percentage points), and the current account surplus ($120.7 billion), whereas private consumption was raised by only 0.1 percentage point. KDI attributed the downward employment outlook to the relatively low employment-creating effect of semiconductors, sluggish business conditions in non-semiconductor and non-construction sectors, and slowing service sector employment, compounded by demographic shifts. July employment trends support KDI's diagnosis, showing consecutive declines in manufacturing employment for 25 months, construction for 27 months, and youth employment for 45 months. KDI's 3.2% projection is the highest among forecasters, surpassing the government's 3.0% and the Bank of Korea, OECD, IMF, and ADB's 2.6%, while next year's forecasts of 200,000 new jobs and 2.7% construction investment remain conditional on sustained AI investments and other factors.