0
Source: Yonhap

The Asian Development Bank (ADB) has projected South Korea's economic growth rate for 2025 at 1.5%, marking a 0.5 percentage point drop from its December forecast of 2.0%. The updated outlook does not account for the potential impact of the reciprocal tariffs recently announced by the United States, leaving room for further downward revisions.

According to the Ministry of Economy and Finance on April 9, the ADB released its “2025 Asian Economic Outlook,” adjusting South Korea’s GDP growth forecast downward due to several domestic and external risk factors.

The ADB’s revised projection is lower than forecasts by the International Monetary Fund (2.0%), the South Korean government (1.8%), and the Korea Development Institute (1.6%), but aligns with those of the Bank of Korea and the OECD (both 1.5%).

Explaining the downgrade, the ADB cited domestic challenges such as high interest rates, household debt, political uncertainty, weakening private consumption, and sluggish construction activity. External concerns included growing export competition with the U.S. and China and rising trade uncertainty.

Despite challenging domestic and global conditions, the Asian Development Bank (ADB) expects South Korea's economy to rebound in the second half of the year, supported by strong semiconductor exports related to artificial intelligence (AI), increased government spending, political stability, and expansionary monetary policy. For 2026, the ADB projects the growth rate will rise to 1.9%.

The latest forecast does not reflect the impact of reciprocal tariffs announced by the United States on April 2. If the U.S.-China tariff war escalates and negotiations over the 25% tariff Washington plans to impose on South Korean products stall, the ADB may revise its forecast downward again in a supplementary outlook expected in June or July.

The ADB also lowered South Korea’s 2025 inflation forecast by 0.1 percentage points to 1.9%, citing falling international oil prices and stabilizing food and energy costs. Inflation is projected to remain at 1.9% in 2026 as well.

For the broader Asia-Pacific region, the ADB raised its 2026 growth forecast by 0.1 percentage points to 4.9%. It projects China to grow by 4.7%, Taiwan by 3.3%, India by 6.7%, Singapore by 2.6%, and Vietnam by 6.6%.

The ADB noted that while U.S. tariff actions, trade uncertainty, and China’s real estate slump could dampen growth, rising demand for semiconductors, stable inflation, and a recovery in tourism will help boost regional demand.

The inflation rate for the Asia-Pacific region in 2025 is forecast at 2.3%, down 0.3 percentage points from the previous estimate, and at 2.2% for 2026.