The head of South Korea’s central bank says the domestic economy will improve considerably this year compared with last year, due to improved consumer sentiment and a surge in exports driven by demand for semiconductors.

Bank of Korea(BOK) Gov. Rhee Chang-yong gave the outlook Monday while speaking to lawmakers on the National Assembly’s Finance and Economic Planning Committee.

In its last forecast, released in November, the BOK projected the economy would expand one-point-eight percent in 2026, following last year’s one percent growth.

Rhee noted that there are potential risk factors, such as trends in international oil prices and increased volatility in foreign exchange markets.

He said measures to stabilize foreign exchange supply and demand toward the end of last year mitigated the South Korean won’s weakness against the U.S. dollar, but explained that it’s still being affected by movements in the dollar and the Japanese yen.

Rhee also pointed to the sharp rise in stock prices, driven by AI-related demand, which has seen more volatility amid growing concerns about excessive spending in the sector and negative impacts on existing industries.

Rhee said the BOK has maintained its key interest rate at two-point-five percent since last year in consideration of such economic conditions.

Based on a comprehensive evaluation of the economic landscape, inflation and financial stability, Rhee said the central bank will decide on the direction of the nation’s monetary policy, taking into account all internal and external uncertainties.

The BOK’s Monetary Policy Board is set to hold its next rate-setting meeting Thursday.