OECD Lowers South Korea's Growth Forecast to -1.1% This Year... "Focused Support for Vulnerable Groups" (Comprehensive)

[Asia Economy Reporter Jang Sehee] The Organisation for Economic Co-operation and Development (OECD) has lowered South Korea's economic growth forecast for this year to -1.1%, reflecting the impact of the resurgence of COVID-19. This figure is 0.1 percentage points lower than the -1.0% forecast made in September. The global economy is also expected to contract by -4.2% due to measures such as quarantine restrictions.

According to the Ministry of Economy and Finance on the 1st, the OECD revised South Korea's economic growth forecast for this year downward by 0.1 percentage points from -1.0% to -1.1% in the 'OECD Economic Outlook' released that day. The OECD had initially forecast South Korea's growth rate at -1.2% in June, raised it to -0.8% in August, and then lowered it again to -1.0% in September.

Among the 37 OECD member countries, South Korea's economic growth forecast predicted by the OECD ranks first. Among G20 countries, it is expected to rank second after China (1.8%).

Looking in detail, private demand is expected to decrease by 1.1% this year and rebound by 2.7% next year. Personal consumption is forecasted at -4.1% and 3.2%, respectively. Inflation is expected to remain low, at 0.5% this year and 0.6% next year. The unemployment rate is expected to slightly decrease from 3.8% to 3.6%.

The OECD evaluated that South Korea's economy this year saw consumption revive due to large-scale fiscal support and exports recover centered on semiconductors, but jobs decreased. It also emphasized that the Korean New Deal will drive investment.

The OECD stressed that government fiscal support should be focused on vulnerable groups. Additionally, it stated that extending crisis response measures such as tax support and structural reforms to prepare for digitalization are necessary.

The global economic growth rate for this year was revised upward by 0.3 percentage points from -4.5% in September to -4.2%. The global economic growth rate for next year was lowered by 0.8 percentage points from 5.0% in September to 4.2%. The OECD expects that the growth rate in the fourth quarter of this year will again record negative growth due to strengthened lockdown measures in major countries such as Europe.