Global investment bank Morgan Stanley raised its forecast for South Korea's gross domestic product (GDP) growth rate this year from 1% to 1.1%, an increase of 0.1 percentage point. The bank cited the decision to postpone reciprocal tariffs for 90 days as well as the potential shift from sound finance to expansionary finance following the 21st presidential election.
According to the financial investment industry on the 22nd, Kathleen Oh, Morgan Stanley's economist for South Korea and Taiwan, noted in a report titled "Expecting New Era After Election" that it also revised the 2026 GDP growth rate upward from the previous 1.4% to 1.5%, an increase of 0.1 percentage point.
Oh said, "Due to tariff uncertainty, we maintain a bearish outlook on South Korea," but also explained that the GDP growth rate forecast was adjusted considering the gradual de-escalation of tariff conflicts between the U.S. and China and the U.S. announcement of a 90-day postponement of reciprocal tariffs.
Oh also mentioned that the fiscal policy could emerge as a new growth driver after the presidential election, forecasting that a second supplementary budget will be prepared in the latter half of this year. He expected that the main budget would increase more quickly than in the past three years.
Regarding monetary policy, Oh anticipated that the Bank of Korea would lower the key interest rate to 2%, which is below the neutral rate range (2.25% to 2.75%).
For this year and 2026, he presented a consumer price index (CPI) rise rate of 1.9%. Oh stated, "Gradual domestic recovery and global demand weakness that applies downward pressure on oil prices could suppress the CPI rise rate."