IMF "South Korea's Growth Rate 3.1% This Year"…0.2%P Up from October Forecast

IMF Announces 'World Economic Outlook January 2021' on the 26th

[Asia Economy Reporter Jang Sehee] The International Monetary Fund (IMF) has revised South Korea's economic growth forecast for this year upward from 2.9% to 3.1%. It also projected that the global economic growth rate this year will improve by 0.3 percentage points from the previous forecast of 5.2%, reaching 5.5%.

On the 26th, the IMF released the "World Economic Outlook January 2020," predicting that South Korea's economy will grow at -3.1%, an improvement of 0.2 percentage points from the October forecast. Countries with higher growth forecasts than South Korea included China (8.1%), the United States (5.1%), and the Eurozone (4.2%).

South Korea's growth rate for next year is expected to be 2.9%, which is 0.2 percentage points lower than the October forecast of 3.1%.

The global economic growth forecast was also improved. The IMF projected this year's global economic growth rate at 5.5%, 0.3 percentage points higher than the October forecast. In particular, due to strong policy support and widespread vaccine distribution expected in the summer, advanced economies are expected to grow at 4.3%, 0.4 percentage points higher than the October forecast.

However, emerging and developing countries show varied recovery patterns by country, but due to China's high growth and upward revision of India's growth rate, the IMF forecasted a growth rate of 6.3%, 0.3 percentage points higher than initially expected.

The IMF identified both upside and downside risks as related to the novel coronavirus disease (COVID-19). This reflects the unprecedented persistence of COVID-19 and the differing vaccine situations across countries.

The IMF warned of downside risks such as the resurgence of COVID-19 and delays in vaccine rollout. Additionally, it cited expanded social unrest, premature withdrawal of policy support, and tightening financial conditions as downside risks.

The IMF advised maintaining policy support for vulnerable groups if the spread of COVID-19 continues. It emphasized, "As economic activities normalize, policy support should be gradually reduced while implementing broad policies to support economic recovery," and stressed the need to "address inequality through retraining the unemployed, strengthening social safety nets, and expanding social insurance."

However, it also cautioned about the risks of excessive increases in national debt. The IMF explained, "If national debt becomes unsustainable, debt restructuring should be conducted through the basic framework agreed upon by the Group of Twenty (G20)."

Meanwhile, the Ministry of Economy and Finance evaluated that South Korea's combined growth rate for 2020 and 2021 is the highest among advanced countries. According to the Ministry's own calculations, South Korea's combined growth rate was 2.0%, higher than major countries such as the United States (1.5%) and Japan (-2.2%).