The International Monetary Fund (IMF) projected South Korea's economic growth rate at 2.0% for this year. This figure is down 0.2 percentage points (p) from the forecasted rate of 2.2% presented in last October's World Economic Outlook. It is the same as the projection of 2.0% presented by the IMF annual consultation team that visited Korea before the declaration of martial law and impeachment. Observers indicate that the growth rate forecast does not reflect the increased domestic political uncertainty since December.
The IMF released its January World Economic Outlook at 11 p.m. (Korean time, 9 a.m. local time in Washington, D.C.) on the night of the 17th.
The IMF presented a global economic growth rate of 3.3% for this year, which is an increase of 0.1 p from last October's forecast.
Upward revisions in the U.S. growth rate influenced this. The IMF projected the U.S. growth rate for this year at 2.7%, an increase of 0.5 p from the previous estimate.
In contrast, Germany is projected to grow at 0.3%, down 0.5 p, while France is expected to grow at 0.8%, down 0.3 p. Canada's growth rate is forecasted to decline to 2.0%, down 0.4 p.
Overall, the Eurozone is expected to experience slowed growth, but the U.S. is seen as leading global economic growth with its rapid expansion.
The growth rate for the group of developed countries (41 countries including South Korea, the U.S., the U.K., Germany, France, and Japan) is presented as 1.9%, an increase of 0.1 p from the previous forecast.
By country, the U.S. has significantly revised up its growth rate based on strong consumption due to the asset effect, eased currency policy, and stable financial conditions.
Germany, France, and Italy projected slowed growth due to ongoing geopolitical tensions and weaknesses in the manufacturing sector.
Other developed countries excluding the Group of Seven (G7) and the Eurozone are expected to achieve 2.1% growth, balancing positive effects from the recovery of real wages resulting in consumption stimulation and negative effects from decreased investment due to expanded trade uncertainties.
For South Korea, the growth rate forecast of 2.0% is the same as that presented by the annual consultation team that visited from Nov. 7 to 20. This is higher than the forecast from the South Korean government (1.8%) and the Bank of Korea (1.9%).
The group of emerging and developing countries is expected to maintain the same forecast as last October at 4.2%. The growth rate projection for China is 4.6%, an increase of 0.1 p from the previous estimate. The IMF assessed that large-scale stimulus measures would offset the negative impacts of increased trade uncertainty and sluggish asset markets.
The IMF noted that global economic risk factors are slanted downward, citing ▲ the expansion of protectionism under the new U.S. government ▲ expansive fiscal policy ▲ and immigration policies as risk factors.
The IMF said that particularly, expansive fiscal policies and deregulation could have a positive effect on U.S. economic growth in the short term, but in the medium to long term could lead to rising global bond rates and capital outflows from emerging countries, becoming a threat to the global economy.
There are risks that the expansion of protectionism and immigration restrictions by the Trump administration, which will take office on the 20th, could exacerbate trade conflicts and lead to labor supply disruptions, negatively impacting both the U.S. and the global economy.
The IMF also recommended adjusting currency policies comprehensively considering inflation, growth, and employment situations according to each country's circumstances. It emphasized financial stabilization efforts for sustainable liability management and growth-friendly fiscal investments, as well as protection for vulnerable groups. Additionally, it urged structural reforms to enhance productivity, such as labor market and digitalization, and strengthening multilateral trade cooperation to prevent trade fragmentation.
The IMF releases the World Economic Outlook every January, April, July, and October. In April and October, projections are made for all member countries, while in January and July, revised projections are made for the 30 major countries (including South Korea).