Issue Risks to Korea's growth path from swings in AI investment, Middle East tensions and US trade pressure

Summary

The Bank of Korea judges that uncertainty around its growth path is large, centring on the pace of AI investment and the situation in the Middle East. On the upside, a faster spread of AI could accelerate chip-related exports and investment. Easing tensions that normalise energy supply chains would also lift growth. On the downside, profitability concerns could trigger cuts in real AI investment together with heightened financial market volatility, and tensions in the Middle East could flare up again. Stronger US trade pressure and a heavier tariff burden are further downside risks for the Korean economy. The report tabulates these upside and downside factors for growth and prices, and quantifies the chip and Middle East variables in separate scenarios.