Nomura Asia Insights: Korea, Chip-led Growth Surprised to the Upside
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South Korea's GDP exceeded expectations in the first quarter of 2026, expanding by 1.7% quarter-on-quarter on a seasonally adjusted basis, driven primarily by robust semiconductor exports and accelerating facility investment. Nomura revised its 2026 GDP growth forecast upward to 2.4% from 2.3%.
Export volume surged 5.1% sequentially, while manufacturing output increased by 3.9%, led predominantly by computers and electronic equipment. Construction investment grew 2.8%, and facility investment advanced 4.8% as technology firms accelerated factory build-outs. However, private consumption increased a modest 0.5%, reflecting a continued K-shaped recovery. Net exports contributed 1.1 percentage points to GDP growth, a significant jump from the negative contribution in the prior quarter. This improvement occurred despite Middle East tensions, as declining crude import volumes amplified export strength.
Nomura expects the output gap to remain negative throughout 2026, and domestic inflation transmission appears limited, partly mitigated by government fuel price caps. Consequently, the Bank of Korea is anticipated to maintain its policy rate at 2.50% through the end of 2027.
On the rates strategy front, Nomura exited a portion of its 6-year Korea NDIRS receiver positions following a stop-loss trigger from the GDP data, rotating into 2s5s flattener trades while retaining residual receiving exposure.