IMF Staff Country Reports

The 2023 Article IV Consultation discusses that Korea has faced challenges from inflation and a growth slowdown. Growth declined from mid-2022, as global demand for electronics waned and domestic demand weakened, but has started to recover in recent quarters. Headline inflation has declined significantly after peaking in mid-2022, though core inflation has remained stickier. The economic outlook is subject to a high degree of uncertainty, with risks tilted to the downside. Near-term growth prospects critically depend on the strength of the rebound of the semiconductor cycle and China’s demand for Korean exports of goods and services. Main risks also include weaker growth and tighter monetary policy in major economies, heightened commodity price volatility, resurgence of global banking turmoil, reduced trust in domestic non-bank financial institutions, and a renewed domestic real-estate sector downturn. Moreover, Korea is vulnerable to intensification of geo-economic fragmentation. Upside risks to growth, include a stronger rebound in global semiconductor demand and a faster decline in global inflation.