IMF Executive Board Concludes 2025 Article IV Consultation with Republic of Korea
IMF News, November 24, 2025
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- Published: November 24, 2025
Overview
- The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Republic of Korea. The authorities have consented to the publication of the Staff Report prepared for this consultation.
- Recent context: prolonged domestic political and global trade policy uncertainties have weighed on near-term growth. While growth has slowed, inflation remains close to the target, and financial stability risks remain manageable.
- Authorities are implementing measures to stimulate the economy while tightening macroprudential policies to address housing market pressures.
Outlook and Projections
- Growth projections:
- Growth is projected at 0.9 percent in 2025, as private consumption begins to recover in 2025H2, supported by more accommodative fiscal and monetary policies and easing domestic political uncertainty.
- Growth is expected to rebound to 1.8 percent in 2026, driven by easing uncertainties, the full impact of accommodative policies, and base effects.
- The negative output gap is projected to gradually close starting 2026 as domestic demand strengthens and exports recover amid easing global trade policy uncertainty.
- Inflation and external sector:
- Inflation is expected to remain close to the Bank of Korea’s target of 2 percent.
- The current account surplus is projected to decrease in the near term, as higher effective U.S. tariffs weigh on Korean exports despite import compression and some export reallocation.
- In the medium term, the current account is expected to improve, driven by a gradual recovery in exports and stronger primary income.
Risks and Uncertainty
- Uncertainty around the outlook remains high and risks are tilted to the downside.
- Downside risks cited:
- Prolonged trade policy uncertainty.
- Intensification of geopolitical tensions.
- Greater financial market volatility leading to tighter financial conditions.
- Higher global commodity price volatility.
- A slowdown of the domestic semiconductor sector.
Executive Board Assessment
- Directors commended Korea’s economic resilience, supported by solid macroeconomic fundamentals and skillful policy management.
- Near-term stance:
- Directors concurred that an accommodative policy mix is appropriate to support the cyclical recovery.
- Directors agreed with ongoing monetary policy easing to support domestic demand, while underscoring the need to maintain price stability.
- They emphasized monetary policy should remain agile, well communicated, and data‑dependent given high uncertainty.
- Foreign exchange interventions should remain limited to preventing disorderly market conditions.
- Fiscal policy:
- Directors welcomed current fiscal accommodation given the negative output gap; some Directors noted that a stronger countercyclical fiscal response may be needed to boost domestic demand.
- Given long-term aging-related spending pressures, Directors emphasized resuming fiscal consolidation as growth returns to potential.
- They encouraged expediting structural fiscal reforms—particularly on taxation, spending efficiency, and pensions—and adopting a medium-term fiscal anchor to safeguard long-term fiscal sustainability.
- Financial sector and macroprudential policy:
- Directors agreed the financial sector remains broadly sound and commended proactive measures addressing real estate vulnerabilities.
- Continued monitoring is needed, particularly of project financing and asset quality in non-bank financial institutions.
- Directors welcomed recent macroprudential tightening to curb housing market pressures and recommended further actions, including expediting plans to increase housing supply and reducing regulatory gaps.
- Structural reforms and growth strategy:
- Directors emphasized comprehensive reforms to boost domestic demand and reduce external demand vulnerabilities.
- Recommended measures include reducing labor market duality and rigidity, mitigating aging-related declines in domestic demand, diversifying exports (including targeted support to innovative service startups), and deeper trade integration.
- Structural reforms to boost productivity and lift potential growth were underscored: tackle the productivity gap between large and small firms, streamline regulation, sustain innovation, and harness artificial intelligence.
- Directors welcomed the authorities’ Economic Growth Strategy and ongoing reforms to improve capital allocation.
Key Economic Indicators (selected, 2023 - 2026)
- Real GDP (percent change)
- 2023: 1.6
- 2024: 2.0
- 2025: 0.9
- 2026: 1.8
- Total domestic demand
- 2023: 1.4
- 2024: 0.2
- 2025: 0.1
- Final domestic demand
- 2023: 1.3
- 2024: 0.7
- 2025: 0.3
- Consumption
- 2023: 1.5
- Gross fixed investment
- 2023: -0.2
- 2024: -0.8
- 2025: -2.6
- Stock building 1/
- 2023: -0.5
- 2024: 0.0
- Net foreign balance 1/
- 2023: 1.7
- 2024: 0.5
- 2025: 0.6
- Nominal GDP (in trillions of won)
- 2023: 2,409
- 2024: 2,557
- 2025: 2,611
- 2026: 2,666
- Saving and investment (in percent of GDP)
- Gross national saving
- 2023: 33.5
- 2024: 35.3
- 2025: 34.4
- 2026: 33.6
- Gross domestic investment
- 2023: 31.9
- 2024: 30.0
- 2025: 29.6
- 2026: 29.7
- Current account balance
- 2023: 5.3
- 2024: 4.8
- 2025: 3.9
- Prices (percent change)
- CPI inflation (end of period)
- 2023: 3.2
- 2024: 1.9
- CPI inflation (average)
- 2023: 3.6
- 2024: 2.3
- Core inflation (average)
- 2023: 3.4
- 2024: 2.2
- GDP deflator
- 2023: 4.1
- 2024: 1.2
- Real effective exchange rate
- 2023: -2.2
- 2024: …
- Trade (percent change)
- Export volume
- 2023: 1.1
- 2024: 5.5
- 2025: 2.9
- Import volume
- 2023: -4.0
- Consolidated central government (in percent of GDP)
- Revenue
- 2023: 22.4
- 2024: 21.8
- 2025: 22.6
- 2026: 23.2
- Expenditure
- 2023: 23.1
- 2024: 22.5
- 2025: 24.1
- 2026: 24.6
- Net lending (+) / borrowing (-)
- 2023: -0.7
- 2024: -1.5
- 2025: -1.4
- Overall balance
- 2023: -1.7
- 2024: -2.4
- 2025: -2.3
- Excluding Social Security Funds
- 2023: -3.6
- 2024: -4.1
- 2025: -4.5
- 2026: -4.3
- Central government debt
- 2023: 45.4
- 2024: 44.6
- 2025: 48.2
- 2026: 51.5
- Money and credit (end of period)
- Overnight call rate
- 2023: 3.3
- M3 growth
- 2023: 4.2
- 2024: 6.1
- Balance of payments (in billions of U.S. dollars)
- Exports, f.o.b.
- 2023: 643.6
- 2024: 696.2
- 2025: 680.4
- 2026: 678.3
- Imports, f.o.b.
- 2023: 605.9
- 2024: 596.1
- 2025: 585.7
- 2026: 602.8
- Gross international reserves (end of period) 2/
- 2023: 415.4
- 2024: 410.8
- 2025: 418.6
- 2026: 442.2
- In percent of short-term debt (residual maturity)
- 2023: 213.3
- 2024: 205.6
- 2025: 207.5
- 2026: 216.9
- External debt
- Total external debt (in percent of GDP)
- 2023: 36.7
- 2024: 35.9
- 2025: 38.0
- 2026: 39.6
Excerpted from the IMF press release, IMF Communications Department, November 24, 2025.