KDI cuts Korea’s 2025 growth outlook in half to 0.8%

KDI cuts Korea’s 2025 growth outlook in half to 0.8%

최초입력 2025.05.15 10:56:26

(Yonhap)

The Korea Development Institute (KDI) has sharply cut its forecast for South Korea’s economic growth in 2025 to 0.8 percent from 1.6 percent, the lowest projection among domestic and international institutions.
In its 2025 first-half economic outlook, released on Wednesday, KDI cited worsening trade conditions, including higher U.S. tariffs and a slump in the construction sector, as key factors behind the downgrade. The think tank previously projected a 1.6 percent growth rate in February.
The primary driver of the revision is a contraction in global trade stemming from U.S. tariff increases. “Of the 0.8 percentage point reduction, about 0.5 percentage point is attributed to external shocks (tariffs) and around 0.3 percentage point stems from domestic factors such as prolonged political uncertainty and construction delays,” Jung Kyu-chul, senior fellow at KDI’s Office of Macroeconomic Analysis and Forecasting, said.
KDI expects total export growth to fall sharply from 7 percent in 2024 to just 0.3 percent in 2025, with merchandise exports projected to decline by 0.4 percent. Imports are forecast to rise 0.8 percent, narrowing the current account surplus to $92 billion from $99 billion a year earlier.
The domestic outlook remains bleak. Growth in private consumption, particularly in services such as accommodation and food, has slowed while corporate investment sentiment has weakened.
Construction investment is expected to continue contracting, falling 4.2 percent year on year. “If the United States maintains high tariffs and trading partners retaliate, escalating trade disputes could impose additional downward pressure on Korea’s economic growth,” KDI said.
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KDI cuts Korea’s 2025 growth outlook in half to 0.8%

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