Low-growth trap: Experts predict South Korea’s economy to slow below 1.8% in 2025

Weak consumption, export slowdown, and political turmoil cloud Korea’s economic growth forecast for 2025

South Korea is headed for another year of weak growth, with over 85% of 34 economists and experts predicting the country’s annual gross domestic product growth falling short of 2% in 2025. Experts note that Korea has entered a low-growth phase, weighed down by sluggish domestic consumption and a slowdown in export momentum.

A survey conducted by ChosunBiz revealed that 29 out of 34 Korean economists forecast GDP growth to fall below the Bank of Korea’s estimated potential growth rate of 1.8%. The potential growth rate refers to the maximum sustainable rate at which an economy can grow over the long term without causing inflationary pressures while utilizing all available resources, including labor, capital, and technology. A growth rate below this benchmark indicates an economy entering a low-growth phase.

Korea is grappling with deep-rooted structural challenges, including deteriorating productivity and a shrinking workforce caused by a rapidly aging population and a declining low birthrate.

While the country maintains a competitive edge in key sectors such as semiconductors, automobiles, and steel, the technological gap is widening in emerging fields like artificial intelligence (AI). The country’s leading chipmakers are facing increasing pressure from fast-moving competitors. Uncertainties surrounding global trade policies, especially with the return of the second Donald Trump administration, add another layer of unpredictability.

Half of the surveyed experts anticipate growth between 1.7% and 2.0% this year, aligning with the BOK’s forecast of 1.9% released in November. While most experts foresee growth in the upper 1% range, a significant number also predict growth in the mid-1% range.

Ten experts, or 29.4%, expect growth between 1.3% and 1.7%. One expert each predicted growth between 1.0% and 1.3% and below 1%. Only five experts forecast growth between 2.0% and 2.3%. Notably, no respondents anticipate growth exceeding 2.3%.

Experts identified political uncertainty as the top risk factor for 2025. They agreed that the ongoing domestic political instability could amplify existing vulnerabilities, such as weak consumption, declining competitiveness in key industries, and shrinking export growth amid a second Trump administration’s potential tariffs.

“The BOK and other domestic think tanks assume that the worst economic shock will come in the second half of 2025, which is an optimistic scenario, said Woo Seokjin, an economics professor at Myongji University. “There’s a high chance that the shock could hit in the first half of this year, and it remains uncertain whether trade and diplomatic measures can be effectively implemented amid political turbulence.”

Looking further ahead, experts offered mixed projections for 2026. Nearly 47.1% of respondents expect growth to remain stagnant in the 1.7% to 2.0% range, while 41.2% anticipate a modest recovery to the 2.0% to 2.3% range.

However, some caution that growth could deteriorate further. “The Trump administration’s potential trade policies may not fully take effect this year, but their effects are likely to become pronounced by 2026, disrupting global trade and exerting pressure on Korea’s export-driven economy,” said Yoon Sang-ha, Head of the International Macro Team at the Korea Institute for International Economic Policy.

[Yoon Hee-hoon]

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