South Korea's Economic Growth Forecast Maintained at 1.5%
Global Growth Forecast Revised from 2.7% to 3.0%
"Efforts to Secure Fiscal Resources Contribute to Enhanced Responsiveness"
The Organisation for Economic Co-operation and Development (OECD) has maintained South Korea's economic growth forecast for this year at 1.5%. In contrast, the global growth rate was revised upward by 0.3 percentage points. This indicates that while major countries are rapidly recovering from the impact of COVID-19, South Korea has not achieved a clear rebound.
On the 19th, the OECD released its September Interim Economic Outlook, forecasting South Korea's GDP growth rate for this year at 1.5%. The OECD conducts its main forecasts for member countries twice a year (in June and November) and interim forecasts for the G20 countries twice a year (in March and September). In the main forecast released in June, South Korea's growth outlook was lowered by 0.1 percentage points from 1.6%. This time, the growth forecast was maintained as is.
Meanwhile, the global growth forecast was revised upward from 2.7% to 3.0%, and the G20 forecast was raised from 2.8% to 3.1%, each by 0.3 percentage points. This was due to better-than-expected growth rates in the first half of the year in major countries such as the United States, Japan, and Brazil. The U.S. economic growth rate was raised by 0.6 percentage points from 1.6% to 2.2%, Japan's by 0.5 percentage points from 1.3% to 1.8%, and Brazil's forecast increased by 1.5 percentage points from 1.7% to 3.2%. Except for Russia, which is at war with Ukraine (+2.3 percentage points), this is the steepest increase.
However, the OECD judged that the recovery momentum will weaken over time due to the elevated interest rate environment. Even without additional base rate hikes, the rapid increases so far mean that the effects of rate hikes will inevitably continue for some time. In particular, it pointed out that the slowing Chinese economy, due to high debt and a fragile real estate market, is a major concern for the market.
South Korea's inflation rate for this year was forecast at 3.4%, unchanged from the previous outlook. For G20 countries, the average inflation rate was revised downward by 0.1 percentage points to 6.0%. While most countries saw consumer price inflation decelerate faster than expected, differences widened depending on country-specific conditions, such as Argentina (118.6%) and T?rkiye (52.1%). Nonetheless, despite the recent slowdown, consumer price inflation is expected to remain above medium-term targets until the end of next year.
The OECD recommended monetary policies to curb inflation, normalization of expanded fiscal policies, and structural reform efforts. Regarding policy interest rates, it emphasized the need for appropriate communication with markets due to uncertainties about the impact of rapid monetary tightening, and stressed that efforts to secure adequate fiscal capacity contribute to meeting future policy demands and enhancing resilience. To address declining potential growth rates, aging populations, and the climate crisis, it proposed structural reforms on the supply side, such as productivity and investment improvements.
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