Seoul: South Korea's economy is expected to rebound in 2026, driven by easing uncertainties and accommodative policies, an official from the International Monetary Fund (IMF) said Wednesday, calling on the country to put in efforts to revitalize domestic consumption and accelerate structural reforms to further boost growth.
According to Yonhap News Agency, IMF mission chief for Korea Rahul Anand stated that prolonged domestic political and global trade policy uncertainties have impacted Korea's growth in 2025. The IMF official concluded these remarks following the mission's trip to South Korea, which began on September 11. Growth is projected to reach 0.9 percent in 2025, with domestic demand gradually recovering, supported by more accommodative fiscal and monetary policies. Strong semiconductor external demand is expected to offset declines in other exports.
Korea's real gross domestic product (GDP), a key measure of economic growth, is anticipated to expand by 1.8 percent in 2026. Inflation is likely to remain close to the target of 2 percent throughout the next year. To achieve a target of 3 percent growth, Korea needs to revitalize domestic demand, strengthen external resilience by diversifying its export structure, and expedite structural reforms to boost productivity and address the declining labor supply amid demographic challenges.
Long-term fiscal reforms are necessary to accommodate future age-related spending pressures while ensuring fiscal sustainability, Anand emphasized. He noted that the accommodative monetary and fiscal policies of President Lee Jae Myung's administration are suitable given the moderate inflation and a negative output gap. However, he urged authorities to remain agile amid persisting external uncertainties.
Anand highlighted that the authorities' near-term fiscal stance and spending priorities in the 2026 budget proposal are appropriate. Nonetheless, fiscal consolidation should resume as growth converges to potential to create space for significant long-term spending pressures. He also welcomed Seoul's economic growth strategy centered on supporting the development of service exports and artificial intelligence (AI) transformation, suggesting it would help Korea enhance its resilience to external risks.