Republic of Korea: 2021 Article IV Consultation-Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for the Republic of Korea

IMF Staff Country Reports, March 25, 2021

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Canonical URL: Republic of Korea: 2021 Article IV Consultation-Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for the Republic of Korea

Korea entered the COVID-19 pandemic with sound macroeconomic fundamentals and a resilient financial system.
The initial outbreak led to a sharp decline in economic activity and employment and generated substantial economic slack.
With an effective COVID-19 containment strategy and comprehensive economic policy response, the overall impact was smaller than in peers.
Real GDP growth in 2020 was -1.0 percent.
The economy is projected to grow 3.4 percent in 2021, albeit at varying speeds across sectors, and with a high degree of uncertainty centered on the speed of normalization in the COVID situation.
Public debt has risen and deficits have widened but remain at manageable levels.
Credit continues to grow rapidly.
Financial markets have normalized quickly, and the financial sector has remained relatively sound to date despite the pandemic.
The authorities are pursuing greener and more digital growth, along with a stronger social safety net, through the Korean New Deal.

COVID-19 impact and recovery
- Sharp initial decline in activity and employment; substantial economic slack created.
- Containment and policy response limited damage relative to peers.
- Recovery outlook subject to high uncertainty tied to pandemic normalization.

Fiscal position
- Public debt increased and fiscal deficits widened.
- Despite deterioration, debt and deficits described as remaining at manageable levels.

Financial sector and credit dynamics
- Rapid credit growth observed.
- Financial markets normalized quickly after initial pandemic shock.
- Financial sector assessed as relatively sound to date.

Structural policy orientation
- Policy emphasis on greener and more digital growth.
- Strengthening of social safety net highlighted through the Korean New Deal.