Asia’s fourth-largest economy on track to be surpassed by Taiwan next year
The International Monetary Fund has revised its forecast for Korea, projecting that its per capita gross domestic product will revert to 2022 levels this year while extending the timeline for its economy to reach the $40,000 milestone.
The IMF estimated Korea’s 2025 per capita GDP to be $34,642. The metric, used to assess living standards and economic well-being, declined 4.1 percent from the previous year, according to its “World Economic Outlook” report released last Tuesday.
The IMF has markedly revised its forecast for the Korean economy downward compared to six months ago.
In its October report last year, the global lender projected that the $40,000 milestone would be within Korea’s reach in 2027. However, it has since added two more years, pushing the timeline to 2029.
The forecast for 2029 has also been lowered by nearly 10 percent to $40,341 from the $44,347 it estimated in October.
Economists attribute this two-year delay to the strength of the dollar and the depreciation of the Korean won.
“When the value of the won declines, the GDP, which is expressed in dollars, is significantly affected. While factors such as delays in domestic consumption recovery and political uncertainty can also be cited as contributing factors, the impact of the exchange rate is considered to be substantial,” said Paik Seok-hyun, an economist at Shinhan Bank.
The Korean currency dropped to a multi-year low against the dollar after former President Yoon Suk Yeol declared emergency martial law in December. As of Monday, the won had weakened by nearly 9 percent compared to Oct. 2.
“Two main factors are at play. The impact of US tariff measures that pose a risk to economic growth, and the strong dollar, which affects GDP calculations significantly,” said another economist from a global banking group.
The IMF’s April report also included updated projections for Korea’s economic growth rates for 2025, estimating a growth rate of 1 percent, a sharp cut from the 2 percent forecast made in January.
Over the past five years, the country’s per capita GDP has shown more fluctuations than steady growth.
The figure came in at $33,653 in 2020, surged to $37,518 in 2021, and fell to $34,822 in 2022.
Although it rebounded to $35,563 in 2023 and reached $36,129 last year, the IMF now expects a decline in 2025, underscoring ongoing economic uncertainty.
The IMF projected that Taiwan’s per capita GDP will reach $34,426 this year, with an expectation of $36,319 next year.
In comparison, Korea is forecasted to have $35,880 next year, with gradual increases to $37,367 in 2027 and $38,850 in 2028.
Though Korea is expected to have a slight edge, it is projected to be surpassed by Taiwan next year.
Korea is forecasted to remain ahead of Japan for the foreseeable future. The IMF noted that Japan was overtaken by Korea in 2022, a situation anticipated to persist until 2030.
