The International Monetary Fund has raised its growth forecast for South Korea, pointing to firmer global demand and signs of stabilization in domestic activity, even as it warned that risks to the global economy remain skewed to the downside.
In its January update to the World Economic Outlook, the IMF said it now expects South Korea’s economy to expand 1.9% this year, up from a 1.8% projection made in October. The revision continues a gradual series of upgrades since mid-2025 and places Asia’s fourth-largest economy slightly above the IMF’s average growth estimate for advanced economies.
The improvement reflects a more supportive global trade environment, particularly across technology supply chains. South Korea has benefited from a rebound in semiconductor demand linked to U.S. and global investment cycles, while domestic consumption has shown tentative signs of recovery after a prolonged slowdown.
Still, the IMF’s outlook remains more conservative than those of other forecasters. The South Korean government has projected 2.0% growth for the year, while the Organisation for Economic Co-operation and Development estimated 2.1% in December. The Bank of Korea has maintained a 1.8% forecast. Governor Lee Chang-yong said recently that growth is likely to track close to the central bank’s estimate, though upside risks have increased modestly.
For 2027, the IMF trimmed its forecast for South Korea by 0.1 percentage point to 2.1%, a rate that would still exceed its projection for the U.S. economy. The Fund also revised upward its estimate for South Korea’s growth last year to 1.0%.
Globally, the IMF expects inflationary pressures to continue easing. It forecast worldwide headline inflation at 3.8% this year, down from 4.1% in 2025, helped in part by lower energy prices. Inflation dynamics, however, are diverging among major economies. In the U.S., the IMF warned that tariff-related cost pass-through could slow progress toward the Federal Reserve’s 2% inflation target. In China, persistently low inflation is expected to face gradual upward pressure.
Despite areas of improvement, the IMF said downside risks dominate the global outlook. It cited heavy concentration of investment in a narrow group of artificial-intelligence and advanced-technology firms, unresolved trade tensions, geopolitical uncertainty and elevated debt levels across major economies. A reassessment of expectations around AI-driven productivity and profitability, the Fund warned, could trigger sharp asset-price corrections and broader financial spillovers.
At the same time, the IMF said sustained easing of trade frictions and wider adoption of AI technologies could lift medium-term productivity, offering potential support for export-oriented economies such as South Korea.
