A view of the International Monetary Fund (IMF) logo at its headquarters in Washington, D.C., Nov. 24, 2024. Reuters-Yonhap

Korea's economy rebounded in 2024 after a sharp slowdown the previous year, but its outlook remains uncertain as risks are tilted to the downside, the International Monetary Fund (IMF) said in a report released Friday.

"Economic growth has recovered from a sharp slowdown in 2023, inflation has reached the target, and financial stability risks have decreased," the IMF said in its latest report, attributing the progress to the local authorities' swift policy responses.

The assessment was based on an IMF team's annual meeting with Korea's finance ministry, the Bank of Korea (BOK) and other relevant institutions during its visit to Seoul in November to discuss the country's economic conditions and policy measures.

Despite the recovery, the IMF warned that downside risks have increased due to high uncertainty surrounding policy shifts in major trading partners, including the United States.

The report also highlighted the domestic political unrest stemming from President Yoon Suk Yeol's failed attempt to impose martial law in December and his subsequent impeachment.

The report said other risks facing Asia's fourth-largest economy included slowing global demand for semiconductors, higher global commodity price volatility and the intensification of geopolitical conflicts.

Korea's economy is estimated to have grown 2.2 percent in 2024, supported by strong exports despite relatively weak domestic demand, according to the IMF.

Inflation declined to 1.9 percent in December 2024, reflecting the easing of global supply chain disruptions, lower global oil prices and the central bank's restrictive monetary policy stance, the report said.

The IMF further forecast that inflation will remain close to the BOK's 2 percent target in 2025 as the output gap closes.

The country's current account surplus improved significantly in 2024, driven by recovering global semiconductor demand, the report noted.

"It is expected to normalize in 2025 as export growth moderates and import growth picks up in response to strengthening domestic demand," the report concluded. (Yonhap)