Night view of the Han-gang River in Seoul (Image courtesy of Yonhap)
SEOUL, June 9 (Korea Bizwire) — Leading global investment banks have begun upgrading their forecasts for South Korea’s economic growth in 2025, citing expectations of fiscal stimulus from the new administration and easing trade tensions between the U.S. and China.
After months of downward revisions driven by sluggish domestic consumption and weak exports, institutions such as Goldman Sachs, Barclays, and Morgan Stanley have recently shifted their tone.
Goldman Sachs raised its projection for South Korea’s real GDP growth from 0.7% to 1.1% in a May 16 report, attributing the revision to softened tariff risks from the U.S., improved growth outlooks in the U.S. and China, and Korea’s potential for expanded fiscal support.
The bank estimated that a 5% rebound in Chinese exports could boost South Korea’s exports to China by 1.6%, adding 0.1 percentage points to national growth.
It also forecast that a second supplementary budget equivalent to at least 1% of GDP—on top of the already-announced 13.8 trillion won first round—could lift growth by another 0.3 percentage points.
Barclays followed suit on May 30, raising its 2025 GDP growth forecast from 0.9% to 1.0%, and its 2026 outlook from 1.4% to 1.7%. Notably, this upward adjustment came just after the Bank of Korea cut its own 2025 forecast from 1.5% to 0.8%.
Pedestrians passing through downtown Seoul (Image courtesy of Yonhap)
Barclays also pointed to fiscal policy as a key driver, noting that regardless of election outcomes, expansionary fiscal policy appears to be a shared commitment among major political forces.
However, the bank cautioned that aggressive fiscal stimulus could complicate monetary policy if inflation pressures rise.
Morgan Stanley also adjusted its forecast upward, revising 2025 GDP growth from 1.0% to 1.1%, and 2026 from 1.4% to 1.5%, according to a May 22 report.
Bank of Korea Governor Rhee Chang-yong echoed cautious optimism, stating in a May 29 press briefing that the impact of U.S. tariffs could weaken, and that new fiscal policies may begin to show results.
He noted a gradual rebound in private consumption and predicted that the construction sector would likely bottom out in the second half of the year.
Despite the recent upgrades, caution still prevails. According to the International Financial Center, the average 2025 growth forecast from eight major global investment banks remained at 0.8% as of the end of May—unchanged from the previous month.
Although Goldman Sachs and Barclays revised their outlooks upward, their adjustments were not enough to lift the overall average. Morgan Stanley was not included in the eight-bank survey.
The revisions signal a modest return of optimism, yet they underscore South Korea’s ongoing battle against protracted low growth and a challenging external environment.
M. H. Lee (mhlee@koreabizwire.com)
