The International Monetary Fund (IMF) announced on the 20th that it has downgraded South Korea's economic growth forecast for this year from 2.5% to 2.2% and next year’s outlook from 2.2% to 2.0%.
Despite strong semiconductor exports, prolonged high inflation, elevated interest rates, and weakening domestic demand amid growing uncertainties both domestically and internationally have led major institutions to adopt a more cautious stance on South Korea’s economy.
The IMF’s Korea mission team, led by Rahul Anand, released its "2024 IMF Annual Consultation Results" on the same day.
The IMF mission noted that "South Korea's economic growth this year is expected to reach 2.2%, supported by robust semiconductor exports, though partially offset by weak domestic demand." They also highlighted that "uncertainty surrounding the economic outlook is high, with downside risks prevailing."
The annual consultations, conducted under the IMF agreement, review member countries' macroeconomic, fiscal, and financial conditions. The IMF’s updated forecast is considered to reflect the surprisingly low third-quarter GDP growth estimate of 0.1%.
This latest IMF outlook aligns with the recently revised forecast by the Korea Development Institute (KDI) and is lower than projections from the OECD (2.5%) and the Bank of Korea (2.4%) by 0.2 to 0.3 percentage points.
Other major institutions may follow suit in revising their growth outlooks downward, considering the third-quarter GDP figures. Notably, the Bank of Korea is expected to further lower its growth forecast in its revised economic outlook to be released on November 28.
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