IMF Forecasts Pickup in South Korean Economy Amid Policy Support

Strategic Insights -

The International Monetary Fund (IMF) is predicting a slight increase in the South Korean economy's growth due to lower domestic political uncertainty and policy support. The organization's World Economic Outlook, published on Tuesday, slightly raised its growth projection for South Korea to 0.9 percent for this year and maintained its 2026 outlook for Korea at 1.8 percent. According to Thomas Helbling, deputy director of the Asia-Pacific department, the Korean government's supplementary budgets and policy support will help boost growth in the second part of the year and into the next year.

Key Takeaways:

  • The IMF anticipates a pickup in the South Korean economy's growth due to lower domestic political uncertainty and policy support, citing a growth rate of 0.9 percent for this year.
  • The organization expects the Korean government's supplementary budgets to contribute to a fiscal impulse of just below 1 percent of gross domestic product, helping to boost growth in the second part of the year and into the next year.
  • The IMF warns that the impact of U.S. tariffs on the Korean economy will start to build, weighing on potential growth and making a return to a growth rate of 2 percent to 2.1 percent possible.
  • Structural reforms are necessary to achieve a material increase in the Korean economy's potential growth.
  • The government's new economic growth strategy aims to support productivity, human capital, education, and the diversification of the economy, which should help raise potential growth in the future.
  • Korea's national debt-to-gross domestic product (GDP) ratio is currently around 50 percent, allowing the government to have "fiscal space in the near term."
  • However, the IMF cautions that Korea should use its fiscal space "prudently" and connect short-term and long-term policy efforts to address fiscal pressures from demographics.
  • Asia will be more likely to be affected by renewed trade tensions between the U.S. and China due to its high level of integration in global supply chains and dependence on external trade.

Statistics:

  • The IMF's growth projection for South Korea is 0.9 percent for this year and 1.8 percent for 2026 (IMF World Economic Outlook).
  • The Korean government's supplementary budgets will provide a fiscal impulse of just below 1 percent of gross domestic product (Helbling).
  • Korea's national debt-to-gross domestic product (GDP) ratio is currently around 50 percent (Helbling).
  • The IMF anticipates the impact of U.S. tariffs on the Korean economy will start to build (Helbling).

Sources:

  • Yonhap News Agency, October 17, 2025.
  • IMF World Economic Outlook.
  • Thomas Helbling, deputy director of the Asia-Pacific department, IMF.
  • Krishna Srinivasan, director of the Asia-Pacific department, IMF.