The International Monetary Fund (IMF) put this year's growth outlook for Korea at 0.9%. It slightly raised the figure by 0.1 percentage point (p) from the outlook released on Jul. 30. The IMF said domestic demand is gradually recovering thanks to accommodative fiscal policy, and solid external demand for semiconductors is offsetting declines in other exports.
The IMF Korea mission team, represented by Rahul Anand, Director General of the IMF Korea mission, announced the results of the 2025 IMF Article IV consultation at the Government Complex Seoul in Gwanghwamun, Seoul, on the 24th.
The IMF Korea mission projected Korea's growth at 0.9% this year and said it would rebound to 1.8% next year. Compared with the "July World Economic Outlook" released on Jul. 30, this year's outlook was revised up by 0.1 percentage point. Next year's outlook was unchanged. It projected inflation would stay near the 2% target level in the short term.
However, it added that "uncertainty around the outlook is high, and risks are tilted to the downside." Along with external factors such as changes in the U.S.-driven trade landscape, domestic vulnerabilities including household debt and real estate project financing (PF) could become the Achilles' heel of the Korean economy.
The IMF mission positively assessed the accommodative fiscal policy of the Lee Jae-myung administration. It said, "A combination of accommodative currency and fiscal policies in the short term, along with targeted financial measures, is appropriate to support growth and maintain macroeconomic stability."
From a short-term perspective, the mission presented revitalizing domestic demand and diversifying the export structure as tasks to lift Korea's growth rate. It said, "Pursuing reforms that can boost private consumption and reduce vulnerability to external demand could make growth more resilient."
Director General Anand said, "To spur domestic demand, Korea needs to gradually reduce household debt, ease labor market rigidities, and address demographic changes," adding, "Policies that support the development of services exports and diversify export markets and supply chains can strengthen the resilience of external demand."
As tasks for Korea to secure growth potential, it proposed structural reforms to raise productivity, respond to declining labor supply, and improve capital allocation. On this, Director General Anand said, "It is important to accelerate structural reforms to raise Korea's potential growth rate," adding, "To improve productivity, the productivity gap between small and medium-sized enterprises and large corporations must be narrowed." He continued, "While managing the risks of the AI great transition, focus should be placed on harnessing the benefits of innovation and the AI great transition," adding, "We welcome the authorities' efforts on corporate governance and foreign exchange market reforms. This will help reduce the Korea discount."
He also stressed fiscal reform to prepare for aging. Director General Anand said, "Long-term fiscal reforms are needed to accommodate future expenditure pressures," adding, "Structural fiscal reforms—namely pension system overhauls, revenue mobilization, and improved spending efficiency—are important."