IMF lifts China, South Korea growth forecasts on AI demand

The International Monetary Fund on Wednesday upgraded its growth projections for China and South Korea in its July 2026 World Economic Outlook Update, crediting both economies with riding a wave of AI-related demand that has cushioned them against the broader drag of the Middle East conflict on global output.

China's Upgrade

The IMF now projects China's economy to grow 4.6 percent in 2026, up 0.2 percentage points from its April forecast of 4.4 percent. The fund cited an expansion of 8.1 percent that exceeded its expectations, driven by front-loaded public infrastructure investment and a surge in high-tech manufacturing and exports, according to the IMF's report.steelorbis+3

China's GDP grew 5.0 percent year-over-year in the first quarter of 2026, buoyed by a 14.7 percent surge in exports — particularly integrated circuits, computer equipment, automobiles, and ships — according to J.P. Morgan JPMorgan Chase & Co. ↘ 1.62% Asset Management. The IMF also raised its 2027 China growth forecast to 4.1 percent from 4.0 percent.reuters+1

South Korea's Standout Revision

South Korea received the largest upward revision among the 30 major economies in the IMF's update, with its 2026 growth forecast lifted 0.7 percentage points to 2.6 percent. The fund also raised its 2027 forecast for the country by 0.4 percentage points to 2.5 percent.koreatimes

The IMF identified South Korea as one of four leading net exporters of AI hardware globally, alongside Taiwan, Thailand, and Malaysia, according to The Korea Times. Stronger exports of semiconductors and AI-related goods helped Seoul offset the economic impact of Middle East-related disruptions.koreatimes

"The additional upward revision to the 2027 growth forecast suggests that Korea's semiconductor and AI-related growth momentum could continue into next year," a South Korean Ministry of Finance and Economy official said.koreatimes

Broader Context

The upgrades for China and South Korea contrasted with the global picture. The IMF trimmed its worldwide growth projection by 0.1 percentage points to 3.0 percent for 2026, reflecting supply disruptions linked to the Middle East conflict and elevated energy prices. The World Bank, in a separate report released on July 7, projected China's 2026 growth at 4.4 percent, noting the economy remained "resilient in early 2026, supported by strong high-tech investment and exports".worldbank+3

The IMF described the global economy as shaped by two opposing forces: the negative supply shock from the Middle East conflict and the positive demand shock from rapid AI adoption and technology investment.steelorbis