Korea Institute of Finance: "South Korea's Growth Rate Expected at 0.8% This Year"... Down by 1.2%p

Growth Outlook Revised Downward Amid Continued Economic Sluggishness

The Korea Institute of Finance has significantly lowered its economic growth forecast for South Korea this year, citing continued sluggishness in the country's economy.

In its "Revised Economic Outlook for 2025" released on May 7, the Korea Institute of Finance projected this year's real gross domestic product (GDP) growth rate at 0.8%. This is 1.2 percentage points lower than the 2.0% forecast announced in November last year.

The institute forecast private consumption growth for this year at 0.9%. It expects the recovery in private consumption to slow due to increased domestic and external uncertainties. "As the resolution of domestic and external uncertainties is delayed, consumer sentiment is likely to remain subdued for an extended period," it stated, adding, "Household income conditions are also expected to deteriorate due to worsening corporate management conditions and a slowdown in the labor market."

Construction investment is expected to decrease by 5.7% compared to last year. The institute analyzed that the sluggishness in construction investment will deepen this year as the impact of weak orders in 2022 and 2023 continues. Both total exports and total imports are projected to increase by only 0.3%. The institute stated, "Total export growth is expected to remain sluggish due to global demand contraction caused by U.S. tariffs and heightened economic uncertainty."

The consumer price inflation rate is expected to be 2.0% in the first half of the year and 1.9% in the second half, recording an annual average of 2.0%.

The current account surplus for this year is forecast at $88 billion. The institute analyzed that the sharp decline in international oil prices, driven by slowing global oil demand, will lead to a significant drop in both export and import prices, resulting in a decrease in export and import values.

The institute emphasized, "Given the recent situation where growth has weakened significantly due to sluggish domestic demand and slowing exports, it is necessary to devise more active measures to respond to the economic downturn, while also making efforts to improve the economic structure over the medium to long term."