The Organisation for Economic Co-operation and Development (OECD) has lowered South Korea's economic growth forecast for this year to 2.3%. The growth rate for next year was also revised down by 1 percentage point from the previous forecast (2.2%) to 2.1%.
On the 4th (local time), the OECD released its "December World Economic Outlook" containing these details. The OECD publishes the World Economic Outlook four times a year, and this was the final forecast for this year.
The OECD set South Korea's economic growth forecast for this year at 2.3%, down 0.2 percentage points from the September forecast of 2.5%. The OECD had already lowered its forecast by 0.1 percentage points in September.
The OECD analyzed that "solid global demand supports exports, and with interest rate declines and real wage increases, private consumption will rise from the end of this year." The economic growth rate for next year was lowered by 0.1 percentage points from the previous forecast (2.2%) to 2.1%. The OECD's 2.1% forecast for next year is higher than those of other major institutions such as the International Monetary Fund (IMF, 2.0%) and the Bank of Korea (1.9%).
The OECD expects inflation to remain below target in the short term, unemployment to stay low, and employment to increase due to expanded labor market participation by women and the elderly. It forecasts the benchmark interest rate to fall to 2.5% next year and inflation to recover to the 2% target. Additionally, it anticipates partial recovery of the fiscal deficit from 2023 and this year, leading to fiscal soundness next year.
The global economy is expected to grow by 3.2% this year and 3.3% next year. The OECD assessed that "the global economy is maintaining resilience recently, although world trade, which was weak last year, is on the rise." Regarding inflation, it noted that while price increases in the services sector continue, overall inflation is stabilizing, and in many countries, food and energy price increases have outpaced household income growth.
The United States, the world's largest economy and South Korea's second-largest export destination, saw its economic growth forecast for this year rise from 2.6% to 2.8%. The OECD stated, "Robust growth is expected, supported by recent immigration inflows."
For China, South Korea's largest export market, the OECD maintained the economic growth forecast for this year at 4.9%. However, it projected growth rates to slow to 4.7% in 2025 and 4.4% in 2026.
The OECD identified geopolitical risks such as those in the Middle East and the Russia-Ukraine war, as well as uncertainties in trade policies due to expanded protectionism among major countries, as key downside risks to the global economy. It also pointed out concerns about constraints on interest rate cuts if inflation easing is delayed, and the risk of sharp price adjustments in financial markets due to high asset prices. Increased financial market vulnerabilities from asset expansion in less-regulated non-bank financial institutions and the possibility of a sharp decline in real estate prices were also highlighted.
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