Finance minister tells Fitch Korea will grow in mid-3 percent range this year

South Korea's finance ministry said Thursday that the economy is likely to expand in the mid-3 percent range this year, as an AI and semiconductor boom drives exports and capital spending.

Finance Minister Lee Hyung-il told a visiting annual consultation team from Fitch Ratings that the upswing should outlast the chip cycle, citing large-scale facility investment and the spread of artificial intelligence to regional and smaller companies. He is also deputy prime minister.

"Driven by the AI and semiconductor boom in exports and investment, the Korean economy is highly likely to grow in the mid-3 percent range this year, and the potential growth rate is also expected to break out of its downward trend and rebound," Lee told the team at the government complex in Seoul, according to the ministry.

Fitch's team pressed on whether the current strength is structural rather than a passing memory-chip upturn. Lee pointed to heavy corporate spending on plants and equipment and to AI adoption among smaller and provincial firms, even as a shrinking and ageing population weighs on the labour force.

Rather than folding all of the resulting tax revenue into this year's budget, the ministry plans to channel the money into future growth projects and into strengthening public finances, and to set aside a substantial share of what it regards as a temporary revenue gain as a buffer against external shocks. A dedicated future-response fund is one vehicle for growth investment, the ministry said, alongside performance-based budget management and spending restructuring aimed at holding the national debt ratio below 50 percent through 2030.

"Despite structural difficulties such as population decline and ageing, productivity gains across the economy and a higher potential growth rate are achievable through active fostering of growth drivers such as large-scale facility investment and the spread of AI to regions and smaller companies," Lee said.

Fitch's team held its annual consultations with the finance ministry, other government departments, the Bank of Korea and the Korea Development Institute from Tuesday to Thursday.