ADB slashes Korea’s 2025 growth forecast to 0.8%

(Yonhap)

South Korea’s economy is projected to grow just 0.8 percent later in 2025, even with a modest rebound in domestic activity in the second half of fhe year, the Asian Development Bank (ADB) said on Wednesday. It cited persistent export weakness and a sharp decline in high-growth firms as the main factors for the forecast.

The latest ADB forecast marks a 0.7 percentage point downgrade from its April 2025 projection of 1.5 percent, reflecting concerns over subdued private consumption and rising trade uncertainties. The multilateral lender expects some recovery following political stabilization after June’s presidential election and a boost from the new administration’s fiscal measures, including cashable handouts.

However, the outlook remains gloomy. The ADB also cut Korea’s growth forecast to 1.6 percent, down 0.3 percentage points, warning that sluggish exports and geopolitical risks would likely persist into 2026.

Adding to concerns is a decline in firms that have traditionally driven productivity gains. A recent report by the journal of the Korean Economic Association shows that the share of so-called “high-growth firms,” defined as those posting average annual sales growth of over 20 percent, dropped from 11.9 percent in 2009 to 8 percent in 2022.

“The recent significant contraction in the activities of high-growth firms is expected to have a negative impact on the overall productivity growth rate of the industry,” the report stated.