The International Monetary Fund (IMF) predicted that Korea’s economic growth rate will remain in the low 2% range until 2028. He emphasized the importance of structural reform to revitalize long-term growth and strengthen productivity.
According to the ‘Korea Annual Consultation Report’ released by the IMF on the 19th (current time), Korea’s real gross domestic product (GDP) growth rate increased by 0.8 percentage points (P) from 1.4% this year to 2.2% next year, then slightly decreased in the 2.1-2.3% range. It was expected to fluctuate.
The IMF predicts that the Korean economy will rise slightly to 2.3% in 2025, then slightly decrease to 2.2% in 2026-2027 and 2.1% in 2028.
However, China’s economic recovery, which has a significant impact on the Korean economy, is not reflected in this year’s and next year’s growth forecasts, so there is room for Korea’s growth forecasts to be adjusted upward in the future. Nevertheless, it is predicted that growth will remain in the low 2% range in the medium term.
Additionally, the IMF estimated Korea’s potential growth rate at 2.1% this year, 2.2% next year and 2025, and 2.1% between 2026 and 2028.
‘Potential growth rate’ refers to the maximum growth rate that can be achieved without causing a rise in prices (inflation) while mobilizing all production factors such as labor, capital, and resources in a country. The IMF predicted that Korea’s potential growth rate fell to 1.3% in 2020 due to the impact of COVID-19 and then rose to 1.9% in 2021, but is unlikely to achieve a significant rebound thereafter.
The real growth rate was 4.3% in 2021, exceeding the potential growth rate by 2.4 percentage points. However, last year, the actual growth rate was 2.6% and the potential growth rate was 2.0%, which decreased by 0.6%p. The IMF predicted that starting this year, it will not be easy to grow at the potential growth rate.
The IMF believed that it would be difficult for Korea’s economic growth rate to exceed the potential growth rate level of around 2%, but gave a relatively favorable outlook on inflation.
The inflation rate forecast for this year was revised upward by 0.2 percentage points from 3.4% to 3.6%, and the forecast for next year was revised upward by 0.1 percentage points from 2.3% to 2.4%. It is expected that the price stabilization target of 2% will be achieved at the end of next year and the price target will be maintained at 2% in the medium term from 2025 to 2028.
The IMF Executive Board emphasized the importance of structural reform to revitalize long-term growth and strengthen productive capacity. Citing Korea’s rapid aging as a risk factor, they suggested efforts to strengthen innovation drivers, increase labor market flexibility, and narrow the gender gap. They also called for strong reform of the pension system as it can place a huge burden on national finances.
Reporter Lee Jun-hee jhlee@etnews.com
2023-11-19 05:04:40
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