Seoul: South Korea's state-run think tank has sharply reduced its growth forecast for the local economy in 2025 to 1 percent, attributing the downturn to a slowdown in exports and domestic consumption. The Korea Institute for Industrial Economics and Trade (KIET) announced this revision, marking a 1.1 percentage-point decrease from its previous estimate of 2.1 percent growth presented late last year.
According to Yonhap News Agency, the adjustment follows similar actions by other economic institutions. The Korea Development Institute recently lowered its 2025 growth forecast to 0.8 percent, while the International Monetary Fund adjusted its projection to 1 percent earlier this year. KIET anticipates South Korea's gross domestic product (GDP) to grow 0.5 percent in the first half of the year and 1.4 percent in the second half.
KIET's report highlights anticipated sluggish export growth due to uncertainties in U.S. tariff policies and a limited recovery in domestic consumption, despite the upcoming launch of a new administration and the implementation of an extra budget. The think tank projects South Korea's exports to decline by 1.9 percent year-on-year to $670.6 billion in 2025, influenced by weak global demand and trade uncertainties.
The report provides detailed projections for specific sectors. Semiconductor exports are expected to rise by 5.8 percent on the strength of the growing artificial intelligence industry. Exports of biohealth products and ships are predicted to increase by 11 percent and 10.2 percent, respectively. Conversely, auto exports are forecasted to decrease by 8 percent, while exports of petroleum, petrochemicals, and home appliances are expected to decline by 19.3 percent, 5.3 percent, and 4.1 percent, respectively.
The report also notes a likely reduction of 2.1 percent in steel product exports due to the Donald Trump administration's 25 percent tariffs on all steel imports. It adds that exports to the United States, which reached a record $127.8 billion last year, are expected to experience a significant downturn as a result of these tariff measures.