The Korean economy is facing an increasing possibility of growth remaining below 2% for two consecutive years for the first time in history. The government's projections indicate a growth of 0.9% this year and 1.8% next year, suggesting a clear trend of low growth.
On the 24th, the Ministry of Economy and Finance projected a real gross domestic product (GDP) growth rate of 0.9% for this year and 1.8% for next year. This is half the forecast made in January for this year (1.8%). Poor construction performance and domestic consumption contraction are the main causes. This is the lowest figure recorded since 2020, when the economy experienced negative growth due to the impact of COVID-19.
Next year, the rebound is also expected to be limited. In the past, during foreign currency crises, financial crises, or pandemics, the economy rebounded sharply the following year due to base effects, but this time is different. In 1998, the growth rate recovered from -4.9% to 11.6% in just a year, and in 2009, it rose from 0.8% to 7.0%, yet this time it is expected to be limited to growth in the 1% range. There has never been a case since the GDP statistics were compiled where the growth rate remained below 2% for two consecutive years.
Figures similar to government projections have also been confirmed by the Bank of Korea and Korea Development Institute (KDI), as well as the International Monetary Fund (IMF). The Bank of Korea expects a growth rate of 0.8% this year and 1.6% next year, while the IMF anticipates 0.8% and 1.8%, respectively. This indicates that major institutions acknowledge the low-growth phase of the Korean economy.
The government expects private consumption (1.7%) and construction investment (2.7%) to improve next year, but it forecasts exports will decrease by 0.5%. The main reasons are the tariffs on steel, aluminum, and automobiles imposed by the U.S. The recent uncertainty surrounding tariffs on semiconductor items has not been reflected in this forecast.
U.S. President Donald Trump has stated that if domestic production facilities are not secured, a 100% tariff will be imposed on semiconductors. Additionally, concerns are growing about domestic corporations' investment being curtailed as the U.S. government considers plans for securing equity in companies that establish factories in the U.S.
A government official noted that "if the possibility of imposing tariffs on semiconductor items becomes reality, the growth rate could drop even lower than it is now."