Overseas Projection: Korea's Growth Rate at 1.0%... "Facing Stagflation"

French Natixis Slashes Forecast from 1.8%

"Significant Exposure to Supply Shocks and Rising Energy Costs"

In the aftermath of the U.S.-Iran war, a global investment bank (IB) has forecast that South Korea’s GDP growth rate this year could drop to as low as 1%.

On April 3, 2026, a notice displaying gasoline and diesel prices is placed at a gas station in Yongsan-gu, Seoul, amid a sharp rise in global oil prices following strong remarks by U.S. President Donald Trump. Photo by Dongjoo Yoon

According to the financial sector on April 13, French investment bank Natixis has lowered its forecast for South Korea’s economic growth rate this year from the previous 1.8% to 1.0%, a downward revision of 0.8 percentage points. Among the roughly 40 domestic and international institutions included in the Bloomberg survey, Natixis is the first to lower South Korea’s growth outlook to the low 1% range. The bank also projected South Korea’s consumer price inflation to reach 4.2% this year.

Natixis stated, “We have significantly reduced our growth forecast in consideration of the supply shock,” and assessed that “the worst-case scenario is unfolding in Asia.” The bank further predicted that “emerging Asian countries, including South Korea, will face a stagflationary environment that central banks cannot address.”

Natixis also pointed out on March 18 that South Korea and other Asian countries are taking a direct hit from the Middle East war. The bank noted, “Despite a current account surplus, South Korea will experience a significant shock to its GDP due to its high dependence on imported energy,” and added, “If the government absorbs these costs, the fiscal deficit will increase.”

Natixis went on to say, “The interest rate cut cycle has ended,” and added, “It is highly likely that the central bank will adopt even more hawkish language and eventually raise rates.”

Meanwhile, UK-based research firm Capital Economics also revised down its outlook for South Korea’s economic growth rate on April 10, from 2.0% to 1.6%.

Capital Economics also highlighted South Korea’s high dependence on energy from the Middle East, assessing that the country is highly exposed to the Middle East crisis and the global rise in energy prices. The firm added, “The resulting terms-of-trade shock is likely to deliver a stagflationary blow to the Korean economy, complicating the policy outlook.”

As concerns about the possibility of stagflation in South Korea are growing abroad, attention is turning to the Bank of Korea’s economic outlook assessment next month. Previously, on April 10, Bank of Korea Governor Rhee Chang Yong stated at a press conference, “If the Iran situation is resolved at this moment, the possibility of stagflation is low.”

However, he added, “If energy infrastructure is destroyed, the impact will be long-lasting even after the war ends,” and continued, “It is hard to deny that if the worst-case scenario unfolds, stagflation could occur.”

This content was produced with the assistance of AI translation services.