IMF Lowers South Korea's Growth Rate... "Demographic Structure is a Challenge Factor"

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho is shaking hands and greeting Gita Gopinath, First Deputy Managing Director of the International Monetary Fund (IMF), before their meeting at the Government Seoul Office in Jongno-gu, Seoul, on the afternoon of the 31st.

[Asia Economy Sejong=Reporter Song Seung-seop] The IMF has identified the worsening demographic structure due to low birth rates and aging as a major challenge to the Korean economy. While the IMF has revised upward the global economic growth rate, it announced that it would lower Korea's economic outlook.

On the 31st, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho met with Gita Gopinath, First Deputy Managing Director of the International Monetary Fund (IMF). Deputy Managing Director Gopinath visited Korea to expand communication with major Asian member countries. This is the first visit by an IMF First Deputy Managing Director to Korea in 11 years since David Lipton's visit in 2012.

Deputy Managing Director Gopinath expressed interest and advice on Korea's structural issues while positively evaluating the consistency between fiscal and monetary policies. She analyzed that the financial and foreign exchange sectors have become healthier than in the past and that relevant institutions cooperated to respond swiftly to short-term market instability.

Deputy Prime Minister Choo Kyung-ho explained, “We are making every effort to maintain a sound fiscal stance and manage household debt appropriately,” adding, “We are promoting reforms to secure growth engines through private-sector-led exports, revitalization of investment, and enhancement of potential growth rates.”

Discussions were also held on the main contents of the IMF's revised “World Economic Outlook January 2023” released that morning. The IMF forecasted the global economic growth rate this year to rise by 0.2 percentage points to 2.9%, but projected Korea's growth to decline by 0.3 percentage points to 1.7%. This marks the third consecutive downward revision since July last year, when it was lowered from 2.9% to 2.1%.

Deputy Managing Director Gopinath said, “The global economy will still face difficulties next year,” but added, “We raised the global growth rate due to stronger-than-expected domestic demand in major countries, China's reopening, and mild weather in Europe.” She further stated, “Regarding inflation, the consumer price index is already considered to have peaked,” and predicted, “This year will be a turning point for inflation.”

Meanwhile, Deputy Managing Director Gopinath expressed gratitude for Korea's active participation in IMF capacity development projects and requested an expansion of Korea-IMF Technical Assistance Fund (KSA) contributions. Deputy Prime Minister Choo responded that he would positively consider expanding the contribution scale after comprehensively reviewing demand and domestic fiscal conditions.