IMF raises South Korea's growth rate from 0.8% to 0.9%... "Fiscal consolidation efforts needed"

The International Monetary Fund (IMF) has slightly revised up its growth forecast for South Korea for this year.

On the 24th, according to the Ministry of Economy and Finance, the IMF Korea mission raised South Korea's growth forecast for this year by 0.1 percentage point from 0.8% to 0.9% as a result of its two-week annual consultation held from the 11th.

This slightly adjusted the outlook to the same level as the government and the Bank of Korea's official forecast (0.9%).

Next year's growth rate remained unchanged at the July forecast of 1.8%.

This figure reflects the views of the annual consultation team and is expected to be incorporated into the IMF's official economic outlook next month.

The IMF publishes economic outlooks for all member countries in April and October each year, and issues revised outlooks for the 30 major economies in January and July.

Rahul Anand, head of the IMF Korea mission, said in a statement, "Thanks to accommodative fiscal and monetary policies, domestic demand is gradually recovering, and robust external semiconductor demand is offsetting declines in other exports, so this year's growth rate will be 0.9%," and "next year, as uncertainty eases, accommodative policies take fuller effect, and base effects occur, real gross domestic product (GDP) will expand by 1.8%."

He assessed that inflation is likely to remain close to the target level of 2% through next year, but "forecast uncertainty is high and risks are more tilted to the downside."

Regarding household loans, he evaluated that "preemptive policies to curb household loan growth, particularly targeting some areas of Seoul, and to resolve nonperforming real estate project financing (PF) were effective in addressing vulnerabilities in the financial sector."

Anand said, "It is important to accelerate structural reforms to raise potential growth," and added, "The focus should be on reducing productivity gaps between small and medium-sized enterprises and large firms, managing the risks of the AI transition while leveraging the benefits of innovation and the AI transition."

He also emphasized, "Fiscal consolidation efforts should resume to create space to respond to long-term pressures on public spending," and said, "Pension reform, mobilizing fiscal revenues, and improving spending efficiency are important."

He added, "Improving the medium-term fiscal framework and introducing a credible medium-term fiscal anchor (target) would help secure long-term fiscal sustainability."

No Jeong-dong, Hankyung.com reporter dong2@hankyung.com