Seoul: South Korea's central bank is poised to revise its 2025 growth outlook downward this week, anticipating a drop below 1 percent as the nation contends with sluggish domestic consumption and uncertainties linked to U.S. trade policies, experts disclosed.
According to Yonhap News Agency, the Bank of Korea (BOK) is likely to adjust its gross domestic product (GDP) growth forecast from the current 1.5 percent to approximately 1 percent or even lower during its forthcoming rate-setting meeting on Thursday. This insight comes from a survey involving seven economists.
The experts highlighted that ongoing domestic political uncertainties, coupled with tariff changes driven by the United States, are exacerbating challenges for South Korea, Asia's fourth-largest economy, which is already facing a slowdown. They cautioned that the U.S.-initiated tariff shock could reduce South Korea's growth rate by up to 0.5 percentage point this year.
Predictions from financial institutions such as Shinhan Securities and Kiwoom Securities suggest that the BOK will lower its growth projection to 1 percent. Meanwhile, Nomura Securities anticipates a more substantial decrease to 0.8 percent, citing factors like weak consumer spending, a prolonged downturn in the construction sector, and declining vehicle exports attributable to U.S. tariffs.
Both the Korea Development Institute (KDI) and the Korea Institute of Finance (KIF) forecast a revised outlook between 0.8 and 0.9 percent. In contrast, the Hyundai Research Institute presents a more optimistic perspective, suggesting that the impact on growth could be limited if U.S. tariffs are capped at around 10 percent, a level they describe as "almost the minimum."
Despite varying growth projections, analysts are in consensus about the necessity for a substantial supplementary budget aimed at stimulating corporate investment and consumer spending. They propose a fiscal package ranging from 10 to 30 trillion won to rejuvenate the economy.
South Korea's real GDP contracted by 0.2 percent in the first quarter compared to the previous three months. This unexpected downturn was partly attributed to political instability, following the temporary imposition of martial law by former President Yoon Suk Yeol on December 3. Yoon was removed from office on April 4.