This file photo shows a port in the southeastern city of Busan on April 30, 2025. (Image courtesy of Yonhap)
SEOUL, May 27 (Korea Bizwire) – South Korea’s state-run think tank on Tuesday sharply cut its growth forecast for the local economy this year to 1 percent, citing a slowdown in exports and domestic consumption.
The revised projection by the Korea Institute for Industrial Economics and Trade (KIET) represents a 1.1 percentage-point drop from its previous estimate of 2.1 percent growth presented late last year.
The revision comes after another major economic think tank, the Korea Development Institute, lowered its 2025 growth forecast to 0.8 percent and the International Monetary Fund to 1 percent earlier this year.
The KIET said South Korea’s gross domestic product (GDP) is expected to grow 0.5 percent in the first half and 1.4 percent in the second half.
“This year, the local economy is expected to face sluggish export growth due to uncertainties in U.S. tariff policies and limited recovery in domestic consumption despite the planned launch of a new administration and execution of extra budget,” KIET’s report read.
The KIET also projected South Korea’s exports to decline 1.9 percent from a year earlier to US$670.6 billion in 2025 amid weak global demand sparked by trade uncertainties.
In detail, semiconductor exports will likely increase 5.8 percent on-year on the back of the growth of the artificial intelligence (AI) industry, while outbound shipments of biohealth products and ships are projected to rise 11 percent and 10.2 percent, respectively.
On the other hand, auto exports are forecast to drop 8 percent, with exports of petroleum, petrochemical and home appliances expected to go down 19.3 percent, 5.3 percent and 4.1 percent on-year, respectively.
Outbound shipments of steel products will also likely dip 2.1 percent due to the Donald Trump administration’s 25 percent tariffs on all steel imports, the report said.
“By region, exports to the United States, which hit a record-high last year, are expected to see a notable downturn due to the tariff measures,” it read.
South Korea exported a record $127.8 billion to the U.S. last year, up 10.5 percent from 2023.
(Yonhap)
