IMF projects keeps Korea’s growth outlook unchanged at 1.4%

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The International Monetary Fund (IMF) has forecasted that South Korea’s economic growth rate will remain at 1.4 percent for this year, according to its October World Economic Outlook released on Tuesday. This projection aligns with the forecasts made by the Bank of Korea and the Ministry of Economy and Finance.

The IMF has maintained Korea’s economic growth rate forecast at the previous level of 1.4 percent, which remains unchanged from its July prediction. The IMF has also upheld its global economic growth forecast for this year at 3 percent.

Looking ahead to next year, Korea’s economic growth rate has been adjusted to 2.2 percent from the previous estimate of 2.4 percent, reflecting a 0.2 percentage point decrease. The global economic growth outlook has also been revised downward, moving from the previous 3.0 percent to 2.9 percent, a reduction of 0.1 percentage point.

While assessing the first half of this year, the IMF noted a “strong initial rebound from the depths of the COVID-19 pandemic” and observed that “global financial conditions eased after Swiss and U.S. authorities took strong action in March to contain turbulence in their banking sectors.” However, it also pointed out signs that this rebound is fading, including “a wide-ranging slowdown or contraction in the manufacturing sector” and the observation that “China’s growth momentum is fading following a COVID-19 reopening surge.”

The IMF has predicted that global price stability may only be achieved in 2025, under the assumption that reaching the inflation stability target will take a considerable amount of time due to “core inflation pressures.” This is despite the somewhat stable inflation rates, thanks to the high-interest rate environment and declining international commodity prices. The organization has also recommended avoiding premature monetary policy easing on a global scale, emphasizing the need for a continued tightening policy stance. Regarding fiscal policy, the IMF has suggested smaller expenditure and tax revenue increases to secure fiscal soundness in line with monetary policy.

The IMF releases its World Economic Outlook in January, April, July, and October. It provides an overview for all member countries in April and October, and revises forecasts for 30 countries, including Korea, in January and July.