IMF lauds Korea’s resilience, but warns of downside risks tied to global policy shifts and geopolitical tensions.
Washington, D.C. – February 7, 2025 – The International Monetary Fund (IMF) has completed its Article IV consultation with the Republic of Korea, praising the country’s strong economic fundamentals and swift policy responses. The Korean economy has rebounded from a sharp slowdown in 2023, with inflation reaching its target and financial stability risks decreasing.
The IMF projects the Korean economy to be in broad balance in 2025, with growth reaching potential and inflation near target. Real GDP growth is estimated to have reached 2.2 percent in 2024, supported by strong exports. Growth is expected to moderate to around 2 percent in 2025.
However, uncertainty remains high. Downside risks have increased amid high uncertainty from policy shifts in major trading partners, recent domestic political developments, softening global semiconductor demand, higher global commodity price volatility, and intensification of geopolitical conflicts.
Key Economic Indicators (2022-2025)
| Indicator | 2022 | 2023 | 2024 | 2025 (Projection) |
| Real GDP (percent change) | 2.7 | 1.4 | 2.2 | 2.0 |
| CPI Inflation (end of period) | 5.0 | 3.2 | 1.9 | 2.0 |
| Current Account Balance (in billions of U.S. dollars) | 35.5 | 79.1 | 68.7 | |
| Total external debt (in percent of GDP) | 36.6 | 37.3 | 38.7 |
The IMF’s Executive Directors agreed that near-term policies should focus on rebuilding buffers and preserving macroeconomic stability. They underscored that advancing structural reforms will be key to boost growth potential and enhance resilience against long-term challenges, focusing on aging-related spending pressure. Key is improving youth income, increasing female labor force participation, and attracting foreign talent.
The directors welcomed the ongoing normalization of monetary policy and supported fiscal consolidation in the 2025 budget. Addressing aging-related spending pressures requires more ambitious consolidation, potentially through pension reforms, adopting a fiscal rule, and increasing revenue mobilization.
The IMF also recommended closely monitoring financial vulnerabilities in the real estate sector and encouraged authorities to improve capital allocation and reduce risks from private debt. They also suggested improving allocative efficiency in services and SMEs and increasing labor and product market flexibility. Finally, they advised leveraging the revolution of Artificial Intelligence (AI) to boost productivity and to diversify exports and supply chains.warningthumb_upthumb_down
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