Tariff negotiation deadlock…"South Korea's growth rate 0.9%, likely to be overtaken by Japan"

IMF, outlook for South Korea's growth rate this year

Slightly raised by 0.1 percentage point from 0.8%

Japan revised sharply from 0.7% to 1.1%

The International Monetary Fund (IMF) forecast that South Korea's economic growth rate this year will be overtaken by Japan. While South Korea's growth forecast was slightly raised to 0.9%, Japan's was revised up sharply from 0.7% to 1.1%. There is an interpretation that the conclusion of trade negotiations with the United States may have made the difference in the growth forecasts.

In the "October World Economic Outlook" released on the 14th, the IMF revised South Korea's growth rate for this year up by 0.1 percentage point from last July to 0.9%. The IMF issues economic forecasts four times a year in January, April, July and October. It projected next year's growth rate at 1.8%, the same as in July. The IMF had presented a 0.9% growth forecast for Korea this year after its annual consultation with Korea last month.

It forecast global economic growth this year at 3.2%, up 0.2 percentage point from July's 3.0%. The IMF explained the reasons for the upward revision, saying, "Uncertainty was eased as the U.S. government reduced tariffs from previous levels or delayed the introduction of tariffs," and "the fact that companies in each country showed good adaptability, such as adjusting inventories or expanding trading partners, also had an impact." Specifically, it projected the growth rate for the advanced economies group (41 countries including South Korea, the United States, the United Kingdom, Germany, France and Japan) at 1.6%, up 0.1 percentage point from before. Next year's growth rate was kept at 1.6%, the same as before.

Japan's growth forecast for this year was revised up from 0.7% in July to 1.1%, surpassing South Korea's growth rate. This is understood to reflect that, unlike South Korea, Japan concluded trade negotiations with the United States and thereby reduced uncertainty. The Eurozone, which also concluded trade negotiations with the United States, saw its growth forecast revised up from 1.0% to 1.2%, a 0.2 percentage point increase.

U.S. growth was raised by 0.1 percentage point to 2.0% this year and to 2.1% next year. The IMF said there are quite a few risk variables for the global economy. It cited trade uncertainty, productivity damage due to U.S. immigration restriction measures, and fiscal and financial market instability in various countries.

Reporter Kim Ik-hwan lovepen@hankyung.com