Seoul: An economist from the International Monetary Fund (IMF) shared insights on Tuesday, suggesting that South Korea's economy is starting to show signs of recovery, although it continues to face downward pressures. This comes as the broader Asian market is anticipated to undergo a modest slowdown next year.
According to Yonhap News Agency, the assessment occurred during an annual conference co-hosted by the Korea Institute for International Economic Policy (KIEP) and the IMF in Seoul. The event focused on examining structural changes impacting the global economy, such as ongoing trade tensions, the normalization of monetary policies in major countries, and geopolitical risks, while also exploring potential future policy directions.
During the conference, Sakai Ando, an economist from the IMF's Asia and Pacific Department, projected that Asia's economic growth rate would gradually decelerate from 4.5 percent in 2025 to 4.1 percent in 2026. For South Korea specifically, the IMF forecasted a growth rate of 0.9 percent for this year and 1.8 percent for the next year.
Ando noted that growth had been resilient in the first half of the year despite trade shocks, supported by robust exports, policy easing, and a strong technology cycle, particularly in semiconductors, a crucial South Korean export. However, he also identified significant regional risks, including sudden changes in trade and tariff policies, reduced fiscal capacity to respond to crises, concentrated investments in technologies like artificial intelligence (AI), and potential financial market disruptions that could limit investment.
He further explained that risks are predominantly downside, reflecting trade tensions, and noted that monetary easing is suitable for most countries, including South Korea. Fiscal support, he emphasized, should be sustainable and backed by structural reforms.
In terms of the Bank of Korea's potential policy easing amid a weak Korean won, Ando suggested that targeted market interventions could be suitable in specific scenarios. He stated that the general principle of monetary easing is appropriate if inflation is below target and that intervention is one strategy to manage foreign exchange concerns.