IMF cuts Korea's 2023 growth forecast to 1.5%

By Yi Whan-woo

The International Monetary Fund (IMF) cut its 2023 economic growth forecast for Korea to 1.5 percent, Tuesday, down from a previous forecast of 1.7 percent announced in January.

The IMF also lowered its world economic growth outlook to 2.8 percent from 2.9 percent, assessing that the global economy will undergo a “rocky recovery” due to the war in Ukraine, a risk of geo-economic fragmentation and the existing high level of inflation.

Updated every three months, the IMF's World Economic Outlook in April follows a projection made in January when the growth estimate for Korea was revised down, but the forecast for the global economy was revised up.

While Korea's estimated economic growth in the 1-percent range is on a par with dominant projections here and abroad, the IMF's January forecast stoked concerns in Seoul that the country is failing to catch up with the global economic recovery.

The IMF did not explain the reasons behind lowering Korea's economic outlook in this month's update.

For the world economy, the IMF assessed that the latest global banking turmoil, sparked by the collapses of Silicon Valley Bank (SVB) in the United States and Credit Suisse in Europe, will add to unresolved risks.

A widening credit spread in emerging markets and developing economies was also cited as potential risks.

An economist in Seoul said that the downward economic revisions for both Korea and the world hint at “more complicated challenges” faced by the Korean government.

“The Korean economy is sensitive to the course of the global economy considering it relies heavily on trade, and in that regard, the IMF's latest economic update further casts clouds over the government's push to revitalize the economy,” said Lee Sang-ho, head of the economic policy team at the Korea Economic Research Institute (KERI).

Of the major economies, the growth outlook for the United States was raised to 1.6 percent from 1.4 percent, while China remained steady at 5.2 percent.

Japan's economy is projected to grow 1.3 percent, down from the previous forecast of 1.8 percent, while Germany's is estimated to shrink 0.1 percent, compared to the previous estimate of a 0.1 percent level of growth.

The British economy is forecast to shrink 0.3 percent, faring relatively well compared to its previous outlook of a 0.6 percent contraction.

The economic growth forecast remained unchanged for France at 0.7 percent, Canada at 1.5 percent and Australia at 1.6 percent.