Seoul: Korea's economy is anticipated to grow at a higher rate than initially forecast, potentially exceeding 1 percent this year, according to Bank of Korea (BOK) Governor Rhee Chang-yong. This projection comes amidst ongoing discussions on the need for structural reforms to ensure sustainable growth.
According to Yonhap News Agency, the Korean economy expanded by 1.2 percent on-quarter during the July-September period, surpassing the BOK's previous forecast of 1.1 percent growth. For the entire year of 2025, the BOK initially projected a growth rate of 0.9 percent, with plans to release a revised outlook next month. Governor Rhee, during a parliamentary audit of the central bank, indicated the likelihood of the growth rate exceeding the earlier projection of 0.9 percent.
Rhee highlighted that the better-than-expected third-quarter performance was driven by the government's consumption coupon programs and strong export results. However, he cautioned that the outcome of tariff negotiations with the United States could impact the economic situation. He emphasized the importance of long-term structural reforms for sustainable growth.
In July, South Korea and the U.S. reached a preliminary agreement where Washington would impose a 15 percent tariff on South Korean goods, down from a threatened 25 percent, while Seoul would set up a US$350 billion investment fund in the U.S. Despite this framework, no formal agreement has been finalized, and negotiations continue over the details.
Governor Rhee noted that even if growth surpasses 1 percent, it would still not meet the potential growth rate. South Korea's potential growth rate is estimated at around 2 percent, which is the maximum pace the economy can expand without causing inflationary pressures, as per the BOK.