IMF slashes Korea's 2025 growth outlook to 1%

A woman walks past the International Monetary Fund building in Washington, DC. (AFP-Yonhap)

The International Monetary Fund on Tuesday cut its economic growth forecast for South Korea to 1 percent this year, down from 2 percent projected in January.

The IMF also revised Korea’s economic growth forecast for 2026 to 1.4 percent, a 0.7 percentage point decrease from the previous 2.1 percent projection.

The downgrades come as both domestic and global uncertainties deepen, with increasing trade tensions and policy unpredictability weighing on economic momentum.

Meanwhile, the Bank of Korea projected Korea's economic growth rate for this year at 1.4 percent. The Organization for Economic Cooperation and Development revised its forecast downward last month from 2.1 percent to 1.5 percent, while the Asian Development Bank and the ASEAN+3 Macroeconomic Research Office have forecast growth rates of 1.5 percent and 1.6 percent, respectively.

Last week, S&P Global Ratings reaffirmed its AA long-term sovereign credit rating for Korea, maintaining a stable outlook. For this year, the agency expects growth to slow to 1.2 percent due to persistent trade tensions, but sees a recovery to 2 percent in 2026 and a return to trend thereafter.

The recent IMF report includes a reference forecast based on the status as of April 4, alongside alternative scenarios anchored to other key dates.

Under the April 4 reference forecast, the IMF lowered its global growth projection for 2025 to 2.8 percent, down 0.5 percentage points from its January outlook. Growth forecasts for most major economies were downgraded accordingly.

In an alternative forecast based on data up to April 2 -- before the US announced new “reciprocal tariffs” -- the global growth rate for 2025 was estimated at 3.2 percent, down 0.1 percentage point from the previous forecast.

However, in another scenario based on conditions after April 9, the IMF projected that the global economy would expand by 2.8 percent in 2025.

The temporary 90-day tariff suspension between the US and China was viewed as providing only limited relief, as the adverse impacts on both economies were expected to offset the short-term gains.

For 2026, global growth is forecast at 2.9 percent due to broader economic losses in the US and China outpacing gains in other regions.