IMF trims Korea's 2023 growth forecast to 1.4 percent

Economy

Published: 25 Jul. 2023, 22:00 Updated: 26 Jul. 2023, 15:04

IMF trims Korea's 2023 growth forecast to 1.4 percent

A man walks past the International Monetary Fund (IMF) logo at its headquarters in Washington. [REUTERS]

The International Monetary Fund (IMF) lowered Korea’s growth outlook by 0.1 percent to 1.4 percent this year in its latest forecast released Tuesday despite an upgrade for the global economy.

The revised projection is on par with predictions from the Korean government and the Bank of Korea as the economy is still reeling from higher interest rates and rising prices.

The Washington, D.C.-based institution expects global growth of 3 percent, up 0.2 percent from its previous announcement in April.

The IMF attributed the revision to a restoration in the financial and banking sectors after they were dragged down by the collapse of Silicon Valley Bank and other venture capital-focused lenders.

“The resolution of U.S. debt ceiling tensions has reduced the risk of disruptive rises in interest rates for sovereign debt, which would have increased pressure on countries already struggling with increased borrowing costs,” the IMF said in its World Economic Outlook report.

“The quick and strong action authorities took to contain banking sector turbulence in the United States and Switzerland succeeded in reducing the risk of an immediate and broader crisis,” the report added.

It also cited an agreement on the debt ceiling in the United States and recovery in the tourism industry as the factors upping its growth outlook.

Going forward, the IMF advised that central banks maintain tight monetary policies while the government and banking sectors make efforts to provide ample liquidity in the markets.

“In most economies, the priority remains achieving sustained disinflation while ensuring financial stability. Therefore, central banks should remain focused on restoring price stability and strengthen financial supervision and risk monitoring,” the report said.

“Should market strains materialize, countries should provide liquidity promptly while mitigating the possibility of moral hazard. They should also build fiscal buffers, with the composition of fiscal adjustment ensuring targeted support for the most vulnerable.”

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]