Seoul: An International Monetary Fund (IMF) team has revised South Korea's economic growth outlook for 2025, projecting a 2 percent growth rate, down from an earlier estimate. The team, led by Korea mission chief Rahul Anand, highlighted concerns such as a slowdown in trade and increasing geopolitical tensions as key factors influencing this adjustment. According to Yonhap News Agency, the IMF's latest forecast represents a 0.2 percentage-point decrease from its previous projection issued by the IMF's executive board in October. This announcement followed a two-week visit by the IMF team to South Korea, during which they held discussions with the finance ministry, the Bank of Korea (BOK), and other relevant entities to evaluate the nation's economic conditions and policy strategies. The team predicts that South Korea's real gross domestic product (GDP) will expand by 2 percent in 2025, attributing this to the economy's alignment with its potential growth and the closure of the output gap. For the year 2024, the GDP is expected to grow by 2.2 percent, a slight decrease from the previously projected 2.5 percent. The team noted that while strong semiconductor exports would support growth, a sluggish recovery in domestic demand would partially offset these gains. Inflation has shown a decline, reaching 1.3 percent year-on-year in October 2024, and is anticipated to stay close to the 2 percent target in 2025. However, the outlook is marked by high uncertainty, with risks skewed towards the downside. Anand cited potential risks such as a slowdown in trading partners and escalating geopolitical tensions, including possible policy changes under the upcoming second Donald Trump administration. Since Trump's recent victory in the U.S. presidential election, the South Korean won has experienced fluctuations around the significant level of 1,400 won against the U.S. dollar. Despite this volatility, the IMF team advised that foreign exchange interventions should be restrained to avoid market disruption. Anand emphasized th e importance of exchange rate flexibility for Korea's exports and trade, indicating no major risk from current market volatility. With inflation near the BOK's target, the mission chief suggested that a gradual normalization of monetary policy is appropriate amid prevailing uncertainties. Furthermore, he recommended that the South Korean government focus on enhancing potential growth through structural reforms, particularly by bridging the productivity gap between manufacturing and service sectors, and between large companies and SMEs, via labor and product market reforms. The statement identified recent foreign exchange market and corporate value-up reforms as positive initial steps. However, it clarified that the views expressed are those of the IMF staff and may not necessarily reflect the position of the IMF's executive board. A report based on the mission's preliminary findings will be prepared for review and decision-making by the IMF's executive board.