Seoul: The Bank of Korea (BOK) has announced a reduction in its economic growth forecast for South Korea, cutting the projection for this year to 2.2 percent and lowering the estimate for 2025 to 1.9 percent. This adjustment comes in response to slowing export growth and weak domestic demand.

According to Yonhap News Agency, the revised figures represent a 0.2 percentage point decrease from the BOK’s previous projections in August. The central bank has also made an unexpected move by reducing its key interest rate by a quarter percentage point to 3 percent, indicating a more cautious economic outlook. In a report released last week, the International Monetary Fund (IMF) corroborated the BOK’s projections, forecasting the South Korean economy to grow by 2.2 percent this year and 2 percent in 2025.

Earlier predictions by the finance ministry had anticipated a 2.6 percent growth for 2023 and 2.2 percent for 2025. The ministry plans to release updated projections in December. The BOK has also adjusted its infla
tion forecast for 2024, lowering it to 2.3 percent from its earlier estimate of 2.5 percent, and has decreased the projection for the following year by 0.2 percentage points to 1.9 percent.

The downgrades come amid weaker-than-expected growth in exports, a primary driver of the South Korean economy, due to decreased global demand and uncertainties related to the new Donald Trump administration. Despite exports rising 4.6 percent year-on-year to $57.5 billion in October, marking the 13th consecutive monthly gain, this was the smallest increase since March.

South Korea is also confronting challenges from weak private consumption and investment. High borrowing costs and systemic factors have contributed to a decline in retail sales, which fell by 0.4 percent from the previous month in September and decreased by 2.2 percent year-on-year, continuing a seven-month downward trend.

Industrial production has similarly struggled, dropping 0.3 percent from the previous month in September and declining by 1.1 percent
year-on-year. The BOK had maintained its key interest rate at 3.5 percent after a series of hikes from August 2021 to January 2023, before its recent rate cut, marking the first such adjustment in over three years.