2 weeks Ago By Korea Bizwire
The International Monetary Fund has halved its 2025 growth outlook for South Korea, citing the combined effects of escalating U.S. tariffs and domestic political instability.
( Image created by AI/ChatGPT) WASHINGTON, April 25, (Korea Bizwire) — The International Monetary Fund has halved its 2025 growth outlook for South Korea, citing the combined effects of escalating U.S. tariffs and domestic political instability.
It marks the steepest downgrade among major economic forecasts for the country to date. Rahul Anand, head of the IMF’s Korea mission, explained the rationale during a press briefing on April 23 (local time), following the Fund’s revised World Economic Outlook released the day prior. The IMF cut South Korea’s 2025 GDP growth forecast from 2.
0 percent to 1.0 percent — a significant downgrade that, according to Anand, reflects more than just external shocks. “This revision factors in not only the impact of U.
S. tariff measures but also the shifts in Korea’s political landscape since the end of last year,” Anand said. He noted that while signs of political uncertainty were already present during the IMF’s January interim forecast, the Fund lacked sufficient data at the time to fully quantify their economic effects.
Containers are waiting to be shipped at a port in Busan, about 325 kilometers southeast of Seoul, on March 2, 2025. (Image courtesy of Yonhap) Since October 2024, South Korea has experienced mounting domestic unrest, culminating in a constitutional crisis that included a declaration of emergency powers and impeachment proceedings — developments widely seen as shaking investor confidence and dampening consumer sentiment. Anand emphasized that the downgrade reflects a confluence of factors now visible in economic indicators, such as weakening consumer spending and a downturn in investment.
“These effects, now captured in the data, were significant enough to warrant an adjustment,” he said. Kim Sung-wook, Korea’s executive director at the IMF, echoed this view, describing the adjustment as “essentially two revisions combined into one.” He said the updated forecast captures both the lagged impact of Korea’s political instability and the more recent consequences of protectionist U.
S. trade policies under the Trump administration. In addition, the IMF lowered South Korea’s growth forecast for 2026 from 2.
1 percent to 1.4 percent, citing continued tariff pressure and protracted uncertainty deterring household consumption and business investment. The IMF’s statement marks its first formal acknowledgment of the economic toll from Korea’s ongoing political crisis, positioning governance stability alongside trade policy as a central risk to the nation’s near-term recovery.
M. H. Lee ( mhlee@koreabizwire.
com ).
