IMF lowers Korea's economic growth forecast for 2024 to 2.2%

The International Monetary Fund (IMF) lowered its 2024 economic growth forecast for Korea to 2.2 percent, Tuesday, down 0.2 percentage points from its previous forecast in July. However, it maintained the country's 2023 growth forecast at 1.4 percent.

The IMF also cut its global economic growth outlook for 2024, bringing it down to 2.9 percent from 3 percent, predicting a "stable but slow" path for the global economy. It held its 2023 outlook steady at 3 percent.

Updated every three months, the IMF's growth estimate for Korea for 2024 has been on a continuous decline ― from a forecast of 2.6 percent in January to 2.4 percent in both April and July.

The institution did not comment on the reasons behind the lowered growth forecast for Korea.

This month's forecast raises concerns about the uncertainty surrounding Korea's economy, which is teetering near recession influenced by both domestic and international factors.

Two months ago, the Bank of Korea (BOK) projected a growth rate of 2.2 percent for 2024, and remarked that "significant uncertainties stem from the trajectory of China's economy, the economic patterns of leading advanced nations and fluctuations in international energy prices."

Amid faltering signs of a full recovery in exports, the economic woes are intensifying due to rising tensions in the Middle East and potential monetary tightening by the U.S. Federal Reserve.

"Given the increasing likelihood of moving into a prolonged low-growth period, there's an urgent need to develop and actively enforce policies that can proactively address these issues," said Joo Won, deputy director of Hyundai Research Institute. "We need consistent efforts to safeguard our domestic market from external challenges, ensuring the stability of our currency and financial landscape."

The IMF recognized the global economy for its strong resilience, even though a prolonged economic slowdown has been influenced by China's recession and a sluggish manufacturing sector.

While the institution expects most countries to achieve their inflation targets by 2025, it cautioned central banks against easing their monetary policies prematurely until a clear downward trend emerges.

Among major economies, only two nations saw an upgraded forecast for 2024. The U.S. estimate was revised upward by 0.5 percentage points, reaching 1.5 percent compared to its July prediction. Canada's forecast was increased by 0.2 percentage points to 1.6 percent. Conversely, Germany and the U.K. are anticipated to experience the most significant forecast reductions, dropping by 0.4 percentage points to 0.9 percent and 0.6 percent, respectively.

For 2023, the IMF adjusted Japan's growth outlook upward from 1.4 percent to 2 percent. The U.S. saw a rise from 1.8 percent to 2.1 percent, whereas Italy's projection was trimmed from 1.1 percent to 0.7 percent.