IMF slashes Korea's 2025 growth outlook to 1%

A giant logo of the International Monetary Fund (IMF) is seen at its headquarters in Washington, D.C., April 17. AFP-Yonhap

The International Monetary Fund (IMF) slashed its 2025 economic growth outlook for Korea to 1 percent, Tuesday, marking a drastic cut from its previous 2 percent forecast in January.

The new GDP forecast for Korea is far lower than the one for the global economy, which was revised down to 2.8 percent from 3.3 percent, and also for the advanced economies, which was brought down to 1.4 percent from 1.9 percent.

This was the IMF's first update on its World Economic Outlook report after U.S. President Donald Trump’s global tariffs — some of which are now on hold — were unleashed on April 2.

Before April 2, multiple economic institutions in Korea and abroad projected that Korea’s GDP would grow this year in the mid 1-percent range.

While U.S. trading partners were hit by Trump’s tariffs, the 1-percentage-point cut in Korea’s 2025 growth estimate was also steeper compared to most major economies, according to the Ministry of Economy and Finance.

The IMF did not elaborate on the details behind its lowered growth forecast for Korea.

The institution simply noted that risks to the global economy are tilted predominantly to the downside.

It also referred to weakened consumption and investment due to heightened uncertainties, limited fiscal and monetary policies over high interest and debts, and increased volatility in financial and foreign exchange markets.

Asked about the serious nature of the IMF’s lowered growth forecast for Korea, Joo Won, director of Hyundai Research Institute, said that “the country is feared to be nearing a recession.”

“An annual GDP growth at 1 percent or lower is witnessed only in times of crisis, such as the 1997-98 Asian financial crisis,” Joo said.

He pointed out that the IMF remains skeptical about Korea’s economic growth next year as well. Its 2026 GDP growth projection was lowered to 1.4 percent on Tuesday, down from 2.1 percent in the IMF’s earlier forecast from January.

Joo said the pace of cuts in Korea’s 2025 GDP outlook also hints at the “vulnerable nature of the country's export-reliant economy in a widening global trade war.”

Meanwhile, the IMF viewed that any possible progress in easing U.S. tariff measures and mutual negotiations with involved countries could serve as upside factors for the global economy.