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/ Source: Yonhap News

The International Monetary Fund (IMF) forecast South Korea’s economic growth at 0.9% for this year, a slight upward revision from July and in line with the IMF’s Article IV consultation released last month. It projected growth of 1.8% next year, suggesting a return to the economy’s potential growth path.

On October 14, the Ministry of Economy and Finance said the IMF’s October World Economic Outlook put South Korea’s real GDP growth at 0.9% for 2025, up 0.1 percentage point from the July estimate. The figure matches both the IMF’s September Article IV projection (0.9%) and the official forecasts of the government and the Bank of Korea.

The IMF kept its 2026 growth outlook for Korea at 1.8%, a notable improvement from this year. The finance ministry interpreted this as an expectation that the economy will normalize to its potential growth trajectory next year, with the recent slowdown gradually easing.

Globally, the IMF forecast world growth of 3.2% this year—0.2 percentage point higher than in July—citing reduced uncertainty from U.S. tariff reductions/deferrals, firms’ resilience shown through inventory adjustment and trade reconfiguration, and a weaker dollar. The 2026 outlook was maintained at 3.1%. The projections assume current tariff levels persist and that U.S.–China tariff deferrals will not be reinstated.

For advanced economies, next year’s growth was nudged up to 1.6%. The United States is expected to grow 2.0% this year and 2.1% next year on the back of tariff cuts, tax legislation, and easier financial conditions. The euro area is projected to expand 1.2% this year, aided by solid growth in Ireland and a recovery in German private consumption, while next year’s outlook was trimmed to 1.1%.

Emerging and developing economies are projected to grow 4.2% this year and 4.0% next year. China is seen expanding 4.8% this year and 4.2% next year, supported by early shipments and expansionary fiscal policy. India is forecast to grow 6.6% this year on robust services, easing to 6.2% next year amid the impact of U.S. tariffs (down 0.2 percentage point).

Global inflation is expected to ease from 4.2% this year to 3.7% next year. The IMF projects inflation of 2.5% for advanced economies and 5.3% for emerging economies this year. In the United States, inflation is seen rising to 2.7% this year—above the 2.0% target—due to tariff effects.

The IMF judged global risks as tilted to the downside, pointing to trade uncertainty, productivity losses from migration restrictions, fiscal and financial instability, and the possibility of a reassessment of new technologies such as AI. It added that any easing of trade tensions and AI-driven productivity gains could become upside drivers.

It also recommended designing rule-based industrial policies to ensure a predictable trade environment; expanding regional and multilateral trade agreements; restoring fiscal buffers through higher revenues and more efficient spending; and building a medium-term fiscal framework with clear anchors. It urged maintaining monetary policy independence and financial-stability efforts while accelerating structural reforms to raise medium- to long-term growth potential.