OECD Lowers South Korea Growth Forecast from 2.3% to 2.2%... Inflation Forecast Maintained at 2.7%

Mid-term Economic Outlook... Korea's Growth Rate Projected at 2.1% Next Year

The Organisation for Economic Co-operation and Development (OECD) has revised South Korea's economic growth forecast for this year downward by 0.1 percentage points, from 2.3% to 2.2%. The inflation forecast remains unchanged at 2.7%.

According to the Ministry of Economy and Finance on the 5th, the OECD projected in its 'Interim Economic Outlook' that the South Korean economy will grow by 2.2% this year. This figure is 0.1 percentage points lower than the economic outlook released last November. While the global growth forecast was revised upward from 2.7% to 2.9%, South Korea's growth rate was slightly lowered. The growth rate for China, South Korea's two major trading partners, was maintained at 4.7%, and the U.S. growth rate was raised by 0.6 percentage points from 1.5% to 2.1%.

Citizens shopping at a large supermarket in Seoul. [Image source=Yonhap News]

For South Korea's growth rate last year, the OECD presented 1.3%, which is lower than the Bank of Korea's preliminary estimate of 1.4%. Since the interim outlook was released ahead of the usual schedule (March), some updated figures may not have been reflected. The growth forecast for South Korea next year remains at 2.1%. Previously, the government and the Korea Development Institute (KDI) projected a 2.2% growth rate for this year, while the Bank of Korea forecasted 2.1%. The International Monetary Fund (IMF) projects South Korea's economic growth at 2.3%.

The OECD expects South Korea's consumer price inflation to gradually slow from 3.6% last year to 2.7% this year and 2.0% next year. The inflation forecasts for this year and next year remain unchanged.

In this interim outlook, the OECD did not provide a separate evaluation of the South Korean economy. However, regarding the global economy, it noted that "the unprecedented interest rate hikes may have a longer or greater impact than expected, potentially exerting downward pressure on economic activity." It also advised that "while there is room for interest rate cuts, a cautious approach is necessary, including maintaining a restrictive monetary policy stance for the time being to contain inflationary pressures."