KDI Holds Firm on 2025 Growth Forecast Despite Upward Revisions in Consumption and Exports

The Korea Development Institute (KDI) has reaffirmed its projection for South Korea's economic growth rate in 2025 at a modest 0.8%, unchanged from its previous forecast three months prior. This steadfast outlook comes despite positive adjustments in consumption and export growth rates, overshadowed by a significant downturn in construction investment.

Kim Ji-yeon, KDI’s forecast coordinator, highlighted the persistent challenges, stating, "Our economy is expected to grow by only 0.8% in 2025, primarily due to the slump in construction investment." This marks a continuation of the institute's cautious stance since May, when it drastically reduced the growth forecast from 1.6% to 0.8%.

Revised Figures Show Mixed Signals

Private consumption has seen a slight upward revision from 1.1% to 1.3%, attributed to lower interest rates and government stimulus measures. Similarly, goods exports have been adjusted from a projected contraction of 0.4% to a growth of 1.2%, buoyed by a stronger-than-expected performance in the global semiconductor market.

However, the construction sector's dramatic decline, with forecasts adjusted from -4.2% to -8.1%, poses a significant drag on the economy. Jeong Gyu-cheol, director of KDI’s Economic Outlook Office, remarked on the severity of the situation, noting, "A figure of -8% is certainly unusual."

Potential Risks on the Horizon

Looking ahead, the KDI warns of several downside risks, including escalating trade conflicts, semiconductor tariffs, and ongoing challenges in the real estate project financing market. These factors could further dampen South Korea's economic prospects, underscoring the fragile nature of the current recovery.