U.S. Growth Rate Revised Upward Ahead of Trump's Inauguration

Ministry of Strategy and Finance Releases January Economic Trends

"Concerns Over Economic Downturn Due to Employment Slowdown"

"IMF and WB Raise Forecast by 0.5%P"

Ahead of Donald Trump's inauguration as President of the United States, major international organizations are significantly revising upward the U.S. growth rate for this year. This is based on the expectation that the protectionist policies of Trump's second administration, such as tariff barriers, will strengthen the U.S. economy.

The International Monetary Fund (IMF) projected in its World Economic Outlook (WEO) update released on the 17th that the U.S. growth rate for this year will be 2.7%. This is a 0.5 percentage point increase from the 2.2% forecast in October last year. The World Bank (WB) also released its Global Economic Prospects report on the 17th, projecting the U.S. economic growth rate for this year at 2.3%, up 0.5 percentage points from the 1.8% forecast in June last year.

Other major countries, excluding the United States, have generally seen downward revisions in their economic forecasts. The IMF lowered the Eurozone's growth rate for this year from 1.2% to 1.0%, and Canada's from 2.4% to 2.0%. The WB also reduced its forecast for the Eurozone's growth rate this year from 1.4% to 1.0%.

Reflecting the unique growth outlook for the U.S. economy, the IMF estimated the global economic growth rate for this year at 3.3%, 0.1 percentage points higher than the initial forecast. The IMF analyzed that "the upward revision of the U.S. growth rate offset the downward revisions of other major economies." The WB expects the global economic growth rate for this year to remain the same as last year at 2.7%. However, it predicted that if the Trump administration imposes a 10% universal tariff and other countries retaliate, the growth rate forecast could be lowered by 0.3 percentage points.

The IMF projected Korea's economic growth rate for this year to be 2.0%, the same as the forecast in November last year. This is higher than the government's forecast of 1.8% and the Bank of Korea's forecast of 1.9%. Regarding this, the Ministry of Strategy and Finance stated that "the IMF economic outlook was prepared based on mid-December last year, right after the martial law and impeachment incidents occurred." This implies that the economic impact of the martial law incident at the end of last year was not reflected.

In its 'January Economic Trends' (Green Book) released today, the Ministry of Strategy and Finance stated, "Employment is slowing and downward pressure on the economy is increasing due to the expansion of internal and external uncertainties." It is evaluated that the warning level for economic downturn has been raised one step higher, citing concerns about employment slowdown following the martial law incident.

Reporter Park Sang-yong/Beijing Correspondent Kim Eun-jung yourpencil@hankyung.com