Bank of Korea Holds Interest Rate for Fifth Straight Month Amid Semiconductor Boom and Concerns of K-Shaped Recovery

Bank of Korea Maintains Key Interest Rate at 2.5%

On the 15th, the Bank of Korea’s Monetary Policy Committee decided to keep the benchmark interest rate steady at 2.5% for the fifth consecutive month. This marks a pause after a 0.25 percentage point cut last May, which has now been held for eight months.

The central bank finds itself in a tough spot, balancing between potential rate hikes and cuts. The main challenge is sluggish economic growth outside the semiconductor sector, which is a significant factor.

Despite Semiconductor Boom, Economic Recovery Remains Slow

Last year, exports surged, leading to a record-high trade surplus, mainly driven by the booming semiconductor industry fueled by growth in the U.S. AI sector. However, this year’s economic growth is projected at around 1.8%, still below the country’s potential growth rate of 2%.

The Bank of Korea’s governor noted that growth excluding the tech sector is only about 1.4%, highlighting a widening gap between industries. While large corporations are benefiting from high exchange rates, small and medium-sized businesses are feeling the pressure, raising fears of a K-shaped recovery where the rich get richer while others struggle.

CoSES Projects Sharp Rise in Earnings Thanks to Bloom Energy Deals

Analysts at Jeil Securities expect CoSES’s operating profit to jump by 149% in 2026, reaching about $35 million. This optimistic outlook is driven by Bloom Energy’s aggressive investments and the possibility of additional supply contracts.

CoSES supplies electrode cell manufacturing equipment to Bloom Energy. Revenue is forecasted to hit around $1.4 billion in 2026, a 120% increase from current levels, with a price-to-earnings ratio of 9.2, indicating the stock is undervalued.

Government Sets 2% Growth Target for 2026

The government announced a strategic plan to boost real GDP growth to 2% by 2026, aiming to surpass the International Monetary Fund’s forecast of 1.8%. Last year, exports exceeded $70 billion, with the semiconductor sector receiving strong government support. The exchange rate is also expected to stabilize around 1,400 KRW per USD.

Key Economic Indicators Summary

• Interest Rate: 2.5%, unchanged for five months
• Growth Outlook: 1.8% by the Bank of Korea, 2% by the government
• CoSES Earnings: Operating profit of $350 million (up 149%)
• Exports: Surpassed $70 billion

While the economy shows signs of recovery driven by semiconductor exports, ongoing uncertainties remain, and broader growth challenges persist.