Political uncertainty + weak domestic demand lead the Bank of Korea to downgrade its 2025 GDP forecast.

The Bank of Korea announced on Monday that it expects South Korea's economic growth in 2025 to be between 1.6% and 1.7%, lower than the forecast of 1.9% made in November last year. The downward revision of about 2 percentage points is mainly due to the political uncertainty triggered by the brief martial law imposed by the South Korean president on December 3, as well as weak domestic demand in the fragile economic sentiment. According to the Bank of Korea's data, the growth rate of last year for the fourth largest economy in Asia may be 2.0% or 2.1%, lower than the 2.2% two months ago, a result also affected by the most serious plane crash in South Korea on December 29 last year. According to foreign media reports, the Bank of Korea plans to officially announce the revised economic outlook in February. The Bank of Korea predicts that "the development trajectory of the South Korean economy will depend on the timing of easing current political uncertainties, government stimulus policies, and the economic policies of the next U.S. government." Last week, amid the political turmoil, the Bank of Korea maintained the benchmark interest rate at 3% to support the weak South Korean won, adopting a wait-and-see approach before the start of the Trump administration's second term. However, Bank of Korea Governor Lee Ju-yeol said at a press conference that maintaining the interest rate unchanged was a difficult decision considering South Korea's weak economic growth momentum, and all members of the council agreed that it was necessary to retain the possibility of further rate cuts in the next three months.