South Korea's 2025 Economic Growth Forecast Downgraded

On January 20^th, the Bank of Korea (BOK) announced South Korea’s expected 2025 gross domestic product (GDP) growth rate at 1.6%-1.7%, which was lower than the previous forecast of 1.9% that they released in November 2024. Although the country maintained a consistent increase in economic growth from 2023 to the first quarter of 2024, it eventually slowed down, resulting in a yearly growth rate of 2% last year — 0.4% lower than originally expected. Notably, President Yoon Suk-yeol’s martial law declaration and the Jeju Air Flight 2216 crash in December resulted in heightened consumer uncertainty and negative economic sentiment, which are expected to carry over to this year. The United States President Donald Trump’s return to office, marked by tariff and protectionist policies, was also cited as another factor negatively impacting the South Korean economy, particularly its exports. This January, the government announced its plans to implement economic recovery measures, including providing a 20% income tax deduction for consumers who increase spending in the first half of the year. Given the prevailing uncertainty from domestic and foreign affairs, the government also stated that it would reassess the overall economic conditions within the f irst quarter to prepare for unexpected circumstances.