Republic of Korea

Korea’s economy has strong fundamentals, but is facing cyclical and structural headwinds. Growth is projected to moderate to around 2.6 percent in 2019, reflecting weaker export growth and investment. Internal demand will be supported by fiscal policy. The output gap is negative and inflation pressures are weak. The current account surplus narrowed, but is expected to remain elevated in 2019. Potential growth will continue its decline, and polarization and inequality are concerns. Labor and product market duality persist. The government is focusing on supporting income, creating jobs, and promoting innovation.