IMF sharply lowers S. Korea’s 2025 growth outlook to 1 pct amid global trade tensions

The International Monetary Fund (IMF) on Tuesday sharply downgraded its growth forecast for South Korea’s economy to 1 percent for 2025, citing heightened global economic uncertainty stemming from newly imposed U.S. tariff measures.

In its latest World Economic Outlook report, the IMF cut its projection for Asia’s fourth-largest economy by 1 percentage point from its previous estimate released in February. The outlook for 2026 was also revised downward by 0.7 percentage point to 1.4 percent.

“The swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity,” the IMF said.

The country has been grappling with political instability following former President Yoon Suk Yeol’s impeachment, which came after his martial law decree in December.

Economic conditions further deteriorated after the Donald Trump administration imposed reciprocal tariffs on major trading partners, dealing a blow to South Korea’s export-driven growth.

The revised forecast for the South Korean economy is more pessimistic than estimates issued by the South Korean government and other major economic institutions.

The Seoul government earlier projected 1.8 percent growth for this year, while the Organization for Economic Cooperation and Development (OECD) and the Bank of Korea (BOK) forecast a 1.5 percent expansion.

“The unpredictability with which these measures have been unfolding also has a negative impact on economic activity and the outlook,” the IMF said of the U.S. tariff scheme. “At the same time, it makes it more difficult than usual to make assumptions that would support a consistent and timely set of projections.”

The IMF urged the international community to work collaboratively to ensure a stable and predictable trade environment, facilitate debt restructuring and tackle shared global challenges.

“At the same time, countries should address domestic policy and structural imbalances to ensure internal economic stability,” the report stated. “This will help rebalance the trade-off between growth and inflation, rebuild policy buffers and revitalize medium-term growth prospects, while also reducing global imbalances.”

Meanwhile, the IMF also revised down its global growth forecast to 2.8 percent for 2025, a 0.5 percentage point cut from its earlier projection.