South Korean Central Bank expects 2025 economic growth to slow due to political uncertainty

The Bank of South Korea said Monday it is likely to revise its real GDP growth forecast for this year to between 1.6% and 1.7% from 1.9%, following its decision to freeze the key interest rate on Jan. 16.

The BOK said in a statement that the forecast indicates that the Korean economy’s growth rate this year may decline by about 0.2 percentage points due to political uncertainty caused by the martial law crisis that the country witnessed on Dec. 3 and the subsequent decline in economic sentiment.

The bank indicated in the statement that it will reveal its revised economic growth forecast on Feb. 25, noting that these forecasts will depend largely on the timing of easing political uncertainty, in addition to the economic stimulus measures that the government may take and the economic policies expected from the new U.S. administration.

The bank noted that the economic growth rate in the last quarter of last year was lower than the expectations issued last November, due to the deterioration of economic sentiment, the contraction of domestic demand against the backdrop of the ongoing political crisis since the declaration of martial law, as well as the tragic Jeju Air plane crash. The bank indicated that the growth rate in the last quarter of last year is expected to record about 0.2%, which is much lower than the previous forecast of 0.5%.