Revised GDP Growth Forecast for 2025

The Bank of Korea (BOK) has announced a potential downward revision of the real GDP growth rate for 2025, from the previously estimated 1.9% to a range of 1.6-1.7%. This adjustment is attributed to the political uncertainty following the martial law situation in December, which has negatively impacted economic sentiment, particularly in domestic demand sectors such as consumption.

Impact of Political Uncertainty and Government Budget

The BOK highlighted the significant impact of the martial law situation on economic stability and consumer confidence, emphasizing the importance of political stability for economic growth. Additionally, the government's budget cuts for the year are expected to further reduce the growth rate by 0.06 percentage points. However, the early execution of the government's budget and other stimulus measures are anticipated to mitigate these negative effects.

Future Outlook and Policy Measures

The BOK plans to release its revised economic outlook on February 25th, with the resolution of domestic political uncertainty, additional government stimulus measures, and the economic policies of the new U.S. administration expected to influence the forecast. The BOK stressed the necessity of preventing the escalation of political uncertainty and ensuring the consistent and normal operation of economic policies, independent of politics, to secure external confidence in the economy and stabilize domestic economic sentiment.