IMF Raises South Korea's Growth Forecast from 2.3% to 2.5%

0.2%p Increase in April Forecast

The International Monetary Fund (IMF) on the 16th revised up its forecast for South Korea's economic growth rate this year by 0.2 percentage points, from 2.3% to 2.5%.

In the 'World Economic Outlook' report released on the same day, the IMF predicted that South Korea's economy will grow by 2.5% this year. This is 0.2 percentage points higher than the forecast announced in April. The forecast for next year was lowered by 0.1 percentage points to 2.2% from the previous 2.3%.

The IMF's growth forecast for this year matches the Bank of Korea's forecast (2.5%) but is lower than the 2.6% forecast by the Organisation for Economic Co-operation and Development (OECD), the Ministry of Economy and Finance, and the Korea Development Institute (KDI).

The IMF expects the global economy to show a favorable growth trend due to the recovery of world trade, including increased exports in the Asia region, and projected the global economic growth rate for this year to remain at 3.2%, the same as in April.

For advanced economies, the IMF maintained the growth forecast at 1.7%, unchanged from the previous outlook. By country, the U.S. growth rate (2.6%) was revised downward due to weaker-than-expected first-quarter performance, while European countries such as France (0.9%), the United Kingdom (0.7%), and Spain (2.4%) are expected to rebound due to real wage increases and improved financial conditions.

Japan (0.7%) is expected to experience a slowdown in growth, considering temporary production disruptions such as shipment halts by some automobile manufacturers in the first quarter.

For emerging and developing countries, the forecast was raised by 0.1 percentage points to 4.3% compared to the previous outlook. China (5.0%) was cited as raising its forecast mainly due to a rebound in private consumption and robust exports, while India (7.0%) was revised upward due to the carryover effect from last year's solid growth and a recovery trend in consumption.

The IMF assessed that the upside and downside risks to the global economic growth rate this year are balanced. Upside factors that could boost growth include productivity increases through successful structural reforms and expanded trade through strengthened multilateral cooperation.

On the other hand, downside risks that could constrain growth include inflation caused by geopolitical conflicts and the resulting prolonged high interest rate environment, abrupt policy changes due to election outcomes, and the expansion of fiscal deficits and debt.