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South Korea's IT Sector Drives Growth, But Disparities Widen, Warns BOK Chief

Bank of Korea Governor Rhee Chang-yong forecasts the South Korean economy will grow 1.8% in 2026, but growth excluding the booming IT sector would be just 1.4%, highlighting a widening disparity. He warns this uneven recovery is unsustainable and stresses the need for structural reforms. Rhee also expressed concern that the won's weakness against the dollar is misaligned with economic fundamentals, increasing inflationary pressure. He cited overseas securities investment as a key FX market imbalance and called for reforms to strengthen domestic industry competitiveness.

Key Points: BOK: Korea's Non-IT Growth at 1.4% in 2026, Highlighting Sector Gaps

  • IT sector leads on semiconductor boom
  • Non-IT growth limited to 1.4%
  • Weak won raises inflation, hurts firms
  • Overseas investment imbalances FX market
2 min read

Economic growth sans IT sector projected at 1.4 pc in 2026: BOK chief

Bank of Korea Governor projects 1.4% growth excluding IT, warns of unsustainable recovery and a weak won's inflationary risks. Key economic insights for 2026.

"The widening of gaps... can hardly be considered a 'sustainable or complete' form of economic recovery. - BOK Governor Rhee Chang-yong"

Seoul, Jan 2

Bank of Korea Governor Rhee Chang-yong on Friday projected the economy, when excluding the information technology sector, to grow 1.4 percent this year, forecasting widening disparities across sectors.

"The IT sector is expected to lead growth this year on the back of a global semiconductor upcycle. If we exclude its contribution, economic growth would be limited to 1.4 percent," Rhee said in his New Year's address, reports Yonhap news agency.

In its latest outlook released in November, the BOK forecast the economy to grow 1.8 percent in 2026, accelerating from last year's projected 1 percent expansion.

Rhee said the widening of gaps in the pace of recovery across sectors can hardly be considered a "sustainable or complete" form of economic recovery for the nation, while stressing the need for continued structural reforms.

Speaking of the foreign exchange market, Rhee said the won's recent 1,400 won level against the U.S. dollar "appears to be significantly out of line with the fundamentals of the economy."

He warned that a weaker won could increase inflationary pressure and put domestic-oriented companies at a relative disadvantage, potentially deepening polarisation.

Rhee pointed to the continued rise in overseas securities investment by local investors as a major factor behind short-term supply-demand imbalances in the FX market, calling for a "comprehensive review" of its impact on economic growth and the development of the domestic capital market from a macroeconomic perspective, according to the report.

"In the mid to long term, it will be necessary to strengthen the competitiveness of domestic industries and expand investment incentives through reforms to capital market institutions in order to address the weakness of the local currency," he said.

- IANS

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Reader Comments

S
Sarah B
The warning about a weaker currency increasing inflation is very relevant. We've experienced similar pressures in India with the rupee. It hits the common person's pocket the hardest.
A
Ananya R
Only 1.4% growth without IT? That's quite low. It shows how crucial tech and semiconductors have become. India is also trying to build its semiconductor ecosystem – we should learn from Korea's experience.
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Rohit P
The point about local investors putting money overseas is interesting. We have the same debate here about Indian money flowing into foreign stocks. Should we make our own markets more attractive first? 🤔
K
Karthik V
While the analysis is sharp, I respectfully disagree with the notion that this recovery isn't "sustainable." A tech-led boom can fund the transition for other sectors. Korea's IT strength is its competitive advantage, not a weakness.
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Priya S
"Widening disparities across sectors" – this is the real concern. Growth must be inclusive. When manufacturing, agriculture, and services all do well, only then does the average citizen benefit. Hope our policymakers are taking notes.

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