IMF Projects Growth for South Korea Amid Tariff Concerns: Official

Seoul: The International Monetary Fund (IMF) anticipates a rise in South Korea's near-term economic growth, attributed to reduced political uncertainty and supportive policies. However, the IMF warns that the impact of U.S. tariffs could hinder the country's potential growth, as stated by an IMF official.According to Yonhap News Agency, Thomas Helbling, the deputy director of the Asia-Pacific department, discussed the IMF's World Economic Outlook during a press conference. The IMF has slightly increased its growth projection for South Korea to 0.9 percent for this year, maintaining its 2026 outlook at 1.8 percent. Helbling noted that lower domestic political uncertainty and enhanced macroeconomic policy support are expected to boost growth. The South Korean government has implemented two supplementary budgets, providing a fiscal impulse of just below 1 percent of the GDP, which aims to bolster growth in the latter part of the year and into the next.Helbling highlighted that while the 2026 growth outlook f or South Korea is close to its potential growth, a return to a potential growth rate of 2 to 2.1 percent is unlikely due to the looming tariff effects. He emphasized the need for structural reforms to achieve a significant increase in potential growth, noting that fiscal policies alone cannot suffice. The government's new economic growth strategy aims to support productivity, human capital, education, and economic diversification.Regarding South Korea's national debt-to-GDP ratio, currently around 50 percent, Helbling described it as relatively low, allowing the government some fiscal space in the near term. However, he advised prudent use of this fiscal space and the importance of aligning short-term and long-term policy efforts, especially considering the fiscal pressures from an aging population.Krishna Srinivasan, the director of the Asia-Pacific department, commented on the renewed trade tensions between the U.S. and China, indicating that Asia, including South Korea, would be more affected due to it s integration into global supply chains and reliance on external trade. Nonetheless, Srinivasan pointed out a "silver lining" for Asia, suggesting a shift towards domestic demand-led growth and regional integration could present new opportunities.