Insights

With low growth becoming entrenched, it is worth gauging the direction Korea's economy is heading into 2026 in advance.

The IMF cut its global growth forecast to 3.3% in 2024, 3.2% in 2025, and 3.1% in 2026. Over the same period, Korea's growth forecast falls more steeply from 1.1% to 0.6% — expected to slip below even the advanced-economy average of 1.6%. Samjong KPMG Economic Research Institute's report systematically organizes the five issues defining 2026's domestic and global economic environment and the outlook for 24 major industries.

Five axes of uncertainty: from Trump risk to financial-market volatility. Five variables will dominate the 2026 economy: ① Trump-administration tariff impositions and trade-policy volatility; ② entrenched low growth and deeper polarization across countries, industries, companies, and individuals; ③ expansive fiscal policy by governments to stimulate domestic demand and nurture advanced industries; ④ uncertainty around US-led rate-cut expectations and monetary policy after inflation stabilization; ⑤ debate over an AI bubble centered on the US Magnificent 7 and high financial-market volatility. Global trade is expected to grow just 2.3% — 1.3 percentage points slower year-on-year — as tariff impacts hit in earnest.

Deepening K-shaped recovery: the gap between conglomerates/exporters and domestic SMEs. Industrial, labor, asset, and technology gaps accumulated since COVID-19 are unlikely to narrow in 2026. The top 10–25% with high assets and incomes continue to consume and invest, while low-income households are likely to see even essential consumption shrink. The government plans to drive domestic recovery through expansive fiscal policy, including the National Growth Fund (KRW 150 trillion + α).

Industry contrast: semiconductors and cosmetics “very positive,” shipbuilding and pharma-biotech “positive.” The report classifies the outlook for 24 major industries as very positive, positive, neutral, or negative. Semiconductors — driven by HBM (high-bandwidth memory) demand in the AI era — and cosmetics — benefiting from the rise of global K-Beauty — earn the “very positive” rating. Smartphones, shipbuilding, pharma-biotech, aviation, media and entertainment, banks, and securities receive a “positive” outlook. Energy and utilities, construction, retail, and insurance are classified as “neutral,” requiring structural response.

What this means for M&A. Entrenched low growth and deepening K-shaped polarization in 2026 create two opposing pressures on the M&A market. First, in “very positive” and “positive” industries — semiconductors, shipbuilding, pharma-biotech, K-Beauty — demand for strategic bolt-on acquisitions and cross-border M&A to secure global competitiveness is set to rise. Second, small and mid-cap domestic-demand companies hit by weak consumption and rising costs are likely to accelerate non-core carve-outs and business divestitures. The government's expansive fiscal policy and National Growth Fund may catalyze strategic and financial investor interest particularly in companies within advanced-industry value chains.