The International Monetary Fund (IMF) slashed South Korea’s economic growth forecast for 2025 to 1 percent from 2 percent, the steepest decline among major economies.

According to the Ministry of Economy and Finance on Tuesday, the IMF released its World Economic Outlook for April. Its global and national economic forecasts come four times a year – in January, April, July, and October.

The latest forecast is based on data as of April 4, which is after the U.S. announcement of reciprocal tariffs.

Korea is expected to suffer the most, with its growth forecast for this year slashed to just 1 percent from 2 percent in January, halving in just three months.

The IMF saw Trump’s aggressive trade policies as a major blow to Korea’s export-driven economy.

Korea’s downgrade is the largest among advanced economies. It is also larger when including emerging markets. Mexico and Thailand are the only countries with steeper declines of 1.7 percentage points and 1.1 percentage points, respectively.

For 2026, Korea’s growth forecast has also been lowered by 0.7 percentage point to 1.4 percent from 2.1 percent.

When it comes to the global economy, the IMF projected growth to plummet to its worst level of 2.8 percent this year, down 0.5 percentage point from its earlier projection in January.

The projection would be the lowest since 2020 when the global economy contracted by 3.3 percent due to the Covid-19 pandemic.

Korea’s economy ministry noted that the revision reflects “a significant downgrade due to trade tensions.”

According to the ministry, the IMF assessed that “global economic risks are tilted to the downside,” citing consumption and investment contraction due to increased policy uncertainty, limited fiscal and monetary policy space amid high interest rates and debt levels, and high volatility in financial and foreign exchange markets as key risks.

The IMF noted that although the U.S. provided a 90-day grace period for countries other than China, it would not be enough to mitigate the global downside risks.

The global economy is projected to grow just 2.9 percent in 2026, lower than the revised forecast of 3 percent, as losses in the U.S. and China outweigh gains in other countries.

To counter slowing growth and rising uncertainty, the IMF stressed the need to establish a predictable trade environment.

It called for curbing indiscriminate industrial subsidies and expanding regional and multilateral trade agreements.

It also emphasized the need for prudent monetary policy and sound fiscal management to ensure financial market and price stability.

[ⓒ 매일경제 & mk.co.kr, 무단 전재, 재배포 및 AI학습 이용 금지]