Seoul: The International Monetary Fund (IMF) on Wednesday adjusted its economic growth forecast for South Korea, projecting an increase to 0.9 percent in 2025. This revision comes amid a recovery in domestic consumption, supported by government stimulus packages.
According to Yonhap News Agency, the IMF's updated forecast reflects a 0.1 percentage-point increase from its previous estimate in July. The growth projection aligns with the Bank of Korea's forecast of 0.9 percent. Rahul Anand, the IMF mission chief for Korea, attributed the revision to stronger-than-expected gross domestic product (GDP) performance in the second quarter, a turnaround in consumer sentiment, and the resolution of political uncertainty following the former President Yoon Suk Yeol's failed martial law bid.
South Korea's real GDP saw a 0.7 percent increase in the April-June period compared to the previous quarter, as per preliminary data from the Bank of Korea. The IMF also recognized the impact of two supplementary budgets adopted by the Korean government to boost the economy.
Looking ahead, the IMF projects a 1.8 percent expansion of the Korean economy in 2026, with inflation likely to remain close to the 2 percent target. However, the IMF warned of high uncertainties due to risks from global trade protectionism, geopolitical tensions, and financial market volatility.
Anand emphasized the need for South Korea to revitalize domestic demand, diversify its export structure, and implement structural reforms to boost productivity. He also highlighted the importance of narrowing the productivity gap between small and medium-sized enterprises and larger firms, and leveraging innovation and artificial intelligence transformation.
The IMF praised President Lee Jae Myung's administration for its accommodative monetary and fiscal policies, considering moderate inflation and a negative output gap. However, Anand advised the authorities to remain vigilant in the face of external uncertainties and to resume fiscal consolidation as growth approaches its potential.