KDI halves S. Korea's 2025 economic growth outlook to 0.8%

In other news.

A local think tank has cut its growth forecast for the local economy in half for this year, with the rate landing in the zero-percent range.

It's taken as a stern warning.

Moon Ji-young covers this latest cut and its reasons.

The Korea Development Institute gave a grim economic outlook for South Korea on Wednesday, citing trade uncertainty stemming from tariffs and weak domestic demand.

Data from the KDI showed it expects the Korean economy to grow just point-8 percent this year.

That figure is exactly half its 1-point-6 percent forecast made only three months ago in February.

The KDI added that of the point-8 percent downward adjustment, external shocks contributed about point-5 percentage points and internal shocks contributed point-3 percentage points.

"The biggest factor for this adjustment is the U.S. tariff increase. The U.S. tariff hikes became full-fledged from April, and on top of that, the uncertainty regarding tariff policy has also significantly increased. These factors are having a negative impact on our exports, and we believe this is also partially spilling over negatively into domestic demand."

While the forecast was based on the assumptions that the 90-day suspension of reciprocal tariffs would continue, the growth outlook could be adjusted further downward if upcoming negotiations fall through or the suspension ends.

The think tank said that despite robust chip shipments, overall exports are slowing, and conditions may further weaken if the U.S. raises tariffs.

Internally, domestic demand is recovering only slowly due to contracted consumer sentiment, driven by political turmoil as well as the mounting external uncertainties.

Private consumption is slowing, especially in the services industry including accommodation and restaurants.

The think tank forecast that consumer prices will rise by 1-point-7 percent this year due to the economic slowdown and falling international oil prices.

Other key factors include the sluggish construction industry and weak corporate investment sentiment.

The KDI highlighted the need to ease monetary policy to respond to a potential economic slowdown caused by growing uncertainties at home and abroad.

Moon Ji-young, Arirang News.