The International Monetary Fund (IMF) maintains its forecast of South Korea's economic growth rate at 1.9%... and raises the inflation rate expectation to 2.5%.

The International Monetary Fund (IMF), while maintaining the forecast for South Korea’s 2026 economic growth rate at 1.9%, has significantly raised the inflation forecast to 2.5%, diagnosing that the Korean economy will face concerns both about slower growth and about the burden of rising prices.

According to a report from the Ministry of Finance on the 14th, in its “World Economic Outlook April 2026” released that day, the IMF set this year’s South Korea real gross domestic product (GDP) growth rate at 1.9%. This is the same as the revised forecast made in January of this year, and it is slightly higher than the average growth rate of 1.8% for developed countries. The IMF made this forecast on the premise that, even if the impact of the Middle East war persists for more than several weeks, energy production and exports will gradually normalize starting from mid-year. The government said that, despite a 0.2 percentage point downgrade to the global economic growth rate, the background for South Korea to maintain a growth outlook lies in the momentum of export recovery and the supplementary effect of additional corrected budgets.

However, based on recent assessments by domestic and international institutions, attention on the South Korean economy remains cautious. The IMF’s 1.9% is higher than the 1.7% proposed by the Organization for Economic Co-operation and Development (OECD) on March 26, but lower than the 2.0% expected by the government and the Bank of Korea before the Middle East war. This matches the forecast value of the Korea Development Institute (KDI). In particular, at the Bank of Korea’s Financial and Monetary Policy Committee meeting on the 10th, it mentioned that the actual growth momentum is weaker than expected, and that this year’s growth rate may fall below the original forecast of 2.0%. While the IMF also keeps South Korea’s growth rate for next year at 2.1%, if external shocks persist, that figure still has room to be adjusted again.

In this forecast, the more notable part is prices. The IMF expects South Korea’s inflation rate to be 2.5% this year. This is 0.7 percentage points higher than the 1.8% proposed during South Korea’s annual consultations in November last year. This has been interpreted as reflecting the judgment that if geopolitical instability leads to increases in international oil prices and various raw material prices, it could trigger a chain reaction and bring pressure to domestic consumers’ prices. In short, even if the growth rate can be maintained, the household “vegetable basket” prices may become heavier. However, the IMF forecasts that South Korea’s inflation rate next year will fall to 1.9%, moving toward relative stability.

The IMF’s overall view on the global economy is also relatively cautious. The IMF sets this year’s global inflation rate at 4.4%, up 0.6 percentage points from January, and assesses that downside risks to the world economy currently dominate. The representative risk factors listed include prolonged war leading to supply chain disruptions, potential financial market adjustments when (AI)-related benefit expectations are dashed, and the possibility of the spread of protectionism. By contrast, if trade conflicts ease or the pace of productivity improvement from AI is faster than expected, these could become upside factors for the economic outlook.

The policy prescriptions are also clear. The IMF recommends that, in monetary and financial policy, priority should be given to price stability, while also carrying out differentiated responses by taking into account each country’s exposure to raw material price shocks and the stability of expected inflation. It notes that if exchange rates fluctuate excessively, temporary market intervention or capital flow management measures can also be adopted. Regarding fiscal policy, it says that while maintaining fiscal soundness, support for vulnerable groups should be temporary and carried out quickly. This trend indicates that South Korea’s future economic management is very likely to still need to address both the two major tasks of growth defense and price management.