Korean Growth Rate Revised Down by 0.2 Percentage Points Compared to August Korea Economic Report
Next Year's Korean Economic Growth Forecast Maintained at 3.1%
US and Others' Economic Growth Outlook More Positive Than in June
[Sejong=Asia Economy Reporter Kim Hyunjung] The Organisation for Economic Co-operation and Development (OECD) has forecast South Korea's economic growth rate for this year at -1.0%. This is 0.4 percentage points higher than the forecast made in June (-1.2%), but 0.2 percentage points lower than the figure presented in the Korean Economic Report in August. The global economic growth rate was revised upward by 1.5 percentage points from -6.0% to -4.5%, reflecting expectations of economic recovery from the COVID-19 pandemic.
On the morning of the 16th (local time in France), the OECD released this 'Interim Economic Outlook.' Typically, the OECD issues economic forecasts for all member countries and G20 nations in May-June and November-December each year, and releases interim economic outlooks for the global economy and G20 countries in March and September. In this forecast, the OECD assessed that global economic conditions have somewhat improved compared to the June forecast, especially among major countries.
In June, the OECD had divided its forecast into two scenarios: Single-hit (no resurgence of COVID-19 by year-end) and Double-hit (resurgence occurs). However, this time, it presented a single figure based on certain assumptions: sporadic virus outbreaks in all countries, continued spread in emerging markets, implementation of regional movement restrictions, and an expected minimum of one year until effective vaccine distribution.
First, the global economic growth rate was revised upward from -6.0% to -4.5%. This reflects the economic recovery following the easing of containment measures and resumption of economic activities in major countries such as the United States, China, and the Eurozone. While projecting these figures, the OECD assumed that most countries would continue to comply with individual quarantine rules and, in the event of a resurgence, would respond with regional movement and activity restrictions rather than full economic lockdowns.
On the 23rd, when social distancing level 2 was expanded nationwide, Gwangjang Market, a representative traditional market in Seoul, showed a deserted appearance. Photo by Yoon Dong-ju doso7@
South Korea is expected to show the most resilient performance among OECD member countries with a growth rate of -1.0% this year. This figure is 0.2% higher than the June forecast (-1.2%) but 0.2 percentage points lower than the -0.8% forecast presented in the August Korean Economic Report. Regarding this adjustment in South Korea's forecast, the OECD cited factors such as a relatively moderate contraction in Q2 GDP and private consumption compared to major countries, and substantial fiscal spending in response to COVID-19. It also noted that, along with Germany and Japan, South Korea experienced relatively minor initial pandemic impacts, but concerns remain that sluggish global trade could hinder future recovery, and that sectors heavily affected by COVID-19 have a high employment share.
Growth rates for China and the United States were revised upward to 1.8% and -3.8%, respectively, representing increases of 4.4 and 3.5 percentage points from the June forecast. China, which is not an OECD member but is a G20 country, is the only one among G20 nations expected to achieve positive growth. Emerging markets generally saw downward revisions in growth rates, reflecting ongoing COVID-19 spread and prolonged containment measures. For example, India's forecast was lowered by 6.5 percentage points from -3.8% to -10.2%, and Mexico's by 2.7 percentage points from -7.5% to -10.2%.
While a general rebound in growth rates is expected next year, the OECD believes most countries will find it difficult to return to pre-crisis levels. The OECD projects global economic growth of 5.0% in 2021 and expects only Turkey, the United States, and South Korea to recover to pre-crisis levels. When combining growth rates for 2020 and 2021, South Korea is expected to rank first among OECD member countries with 2.1%, followed by Turkey and the United States at 1.0% and 0.2%, respectively.
Meanwhile, the OECD recommended maintaining an expansionary macroeconomic policy stance to reduce economic uncertainty and boost economic sentiment, suggesting measures such as maintaining low policy interest rates for an extended period, gradually adjusting emergency support programs while continuing fiscal support, expanding international cooperation on medical equipment trade, and increasing investment to accelerate economic recovery.
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