Finance Minister Choi Sang-mok on Monday said a downward revision of next year’s growth forecast will be "inevitable," with the growth rate expected to fall below 2 percent.

"Given the significant downside risks, a downward adjustment to next year’s growth forecast appears inevitable, with the figure likely to fall slightly below the potential growth rate," Choi, who also serves as deputy prime minister, said during a press conference in Sejong.

The Finance Ministry, which had previously projected 2.2 percent growth for 2025, is set to release updated projections next week. Choi's comments suggest a likely revision below the Bank of Korea’s current potential growth estimate of 2 percent.

Choi’s remarks carry added weight as Korea braces for a colder economic climate in 2025. Citing slowing export growth and escalating trade uncertainties, several global institutions have downgraded their growth forecasts for Asia's fourth-largest economy, with both the International Monetary Fund and Organization for Economic Cooperation and Development projecting 2 percent growth. The Bank of Korea also revised its outlook for next year to 1.9 percent from 2.1 percent.

Choi also expressed concern over the sharp decline in the country’s potential growth rate, which the central bank forecasts will hover around the 2 percent level between 2024 and 2026, eventually slipping to around 0.6 percent by the late 2040s. The potential growth rate represents the maximum pace at which an economy can expand without triggering inflation. Korea’s rate has dropped significantly from 5 percent in the early 2000s to the mid-3 percent range in the 2010s, before stabilizing near 2 percent in recent years.

"We are concerned that, due to various factors, the decline in the potential growth rate may accelerate next year," he said.

While acknowledging that the outlook is not at a crisis level, Choi noted that the overall growth trend is concerning, reflecting the expansion of various uncertainties.

"Growth this year is tracking at or above the potential growth rate, but domestic demand remains weaker than initially projected, with mounting concerns that recent political developments could further undermine confidence," Choi said.

The country’s economic struggles were exacerbated by President Yoon Suk Yeol's brief martial law declaration on Dec. 3 and his subsequent impeachment, which has plunged Korea into prolonged political turmoil and a leadership vacuum.

Exports, a key growth driver for Korea, have also shown signs of slowing, further darkening the economic outlook.

"Export growth faces headwinds from base effects and the (downturn in) the semiconductor cycle, fueling concerns about a potential slowdown. On top of that, heightened trade uncertainties only amplify the downside risks in an already challenging environment," Choi added.

Choi also outlined the economic policy directions for next year, which the ministry plans to announce before the year-end. He said the policy will focus on four key areas: recovery of the public livelihood, management of external credibility, addressing uncertainties in the trade environment and strengthening industrial competitiveness.

The most urgent matter, according to Choi, is the execution of the 673 trillion won ($465 billion) budget starting Jan. 1. "We plan to mobilize all available resources, including policy finance, public and private investments and flexible tax rates," he said.

To safeguard external credibility amid the prolonged political turmoil, Choi pledged to ensure Korea’s planned inclusion in the World Government Bond Index in November 2025 and introduce innovative incentives for foreign investments.

Choi also noted that the government’s strategy to respond to growing trade uncertainties, particularly with the second Donald Trump administration’s upcoming inauguration, is nearly finalized. As finance minister, he will lead the framework, coordinating closely with related ministries, including the Foreign Ministry and Trade Ministry.

Amid expanding trade uncertainties, the government has set up frameworks to strengthen industrial competitiveness in key sectors such as the semiconductor, display, battery and bio sectors.

Choi reiterated that the government will continue its corporate value enhancement initiative despite recent setbacks in the National Assembly, where tax incentives — such as corporate tax credits for increased shareholder returns — failed to pass.

"We are actively engaging with both ruling and opposition parties on regulatory issues, including corporate governance and tax law reforms, while discussions on amending the Commercial Act will also take place within this framework," he said.

Regarding the sharp depreciation of the Korean won against the US dollar, Choi attributed it partly to the recent political unrest and partly to the strengthening dollar. He assured that "strong market stabilization measures will be deployed if there is a sudden spike in volatility."

Monday's conference marked Choi's first engagement with the local press. While he recently reaffirmed his intention to resign after stabilizing the economy during an Assembly hearing, he refrained from elaborating further. Choi did, however, express regret, stating, "As a Cabinet member deeply remorseful for failing to prevent such an outcome, I find it shameful to discuss personal matters at this time."

He added that the ministry is "not in any communication with the presidential office on policy directions."

By Choi Ji-won (jwc@heraldcorp.com)