Korea growth to top 2%, Kospi still has room to run: Finance Minister

South Korea's economy is likely to grow more than 2 percent this year despite macroeconomic and geopolitical risks, while local stocks remain undervalued even after a record-setting rally, Minister of Economy and Finance Koo Yun-cheol said Monday.

"We expect economic growth this year to surpass 2 percent, though by how much will depend on factors including the strength of the semiconductor boom and the impact of the war in the Middle East," Koo said at a press briefing in Sejong, adding the government will present a specific forecast in its second-half economic strategy, due in late June.

The remarks follow stronger-than-expected first-quarter data, with Asia's fourth-largest economy expanding 1.7 percent. The upside surprise has triggered a wave of upgrades, with forecasts from domestic and global institutions now clustering around or above the government's 2 percent target.

Koo pointed to a record current account surplus in the first quarter, nearly double the previous quarterly high of $39.2 billion set in the fourth quarter of 2025, as exports continued to set records, led by semiconductors and other key products.

Still, he flagged inflation as a key risk, citing pressure from higher oil prices amid the war in the Middle East.

"The government will treat inflation control as a top priority, including in its efforts to manage the property market," he said, while also pointing to uncertainty over the semiconductor cycle and the course of the war.

The minister pushed back against concerns that the Kospi is overheating, calling the rally "a market-driven outcome" that reflects global investors' confidence in Korean equities. The index topped 7,800 for the first time Monday, just three sessions after breaching 7,000.

"Based on price-to-book ratios, Korea's stock market remains undervalued compared with advanced markets," he said. "Considering the operating profits of Samsung Electronics and SK hynix, as well as the AI-driven semiconductor cycle, the rally has substance."

Separately, Koo said the government will sell part of its stake in NXC Corp., the holding company of game developer Nexon, back to the company, marking its first partial exit after repeated failed attempts to dispose of the shares through block sales.

The ministry acquired about 852,000 shares, or roughly 30 percent of NXC, from the family of late Nexon founder Kim Jung-ju in February 2023 as payment in kind for inheritance tax. The shares were valued at about 4.7 trillion won ($3.19 billion), but four rounds of public bidding failed as the minority stake carried a control premium despite offering limited influence against the founding family's 68 percent holding.

"The shares were valued at 5.534 million won apiece when the government accepted them as tax payment in kind, and we are selling them at a higher price of 5.558 million won," Koo said. "From the government's standpoint, it appears to have been a successful sale."

NXC will buy 1.02 trillion won worth of shares in June and immediately cancel them, the ministry said, cutting the government's stake to 25.7 percent from 30.6 percent.

Koo said the sale would secure more than 1 trillion won in tax revenue, helping fiscal management and easing pressure on government bond issuance. NXC is also expected to bring in significant overseas capital for the purchase, adding to foreign currency inflows and foreign exchange market stability, he said.