Seoul: The Organization for Economic Cooperation and Development (OECD) has sharply lowered its growth forecast for the South Korean economy this year to 1.5 percent, the finance ministry said Monday.
According to Yonhap News Agency, the latest projection marks a 0.6 percentage-point drop from the OECD’s previous forecast in December, as mentioned in the organization’s latest report. The OECD attributed this revision to increasing trade barriers, and heightened geopolitical and policy uncertainties, though it did not provide further details.
The new estimate aligns with the Bank of Korea’s (BOK) forecast but is more pessimistic than projections by other major institutions, including the finance ministry’s earlier growth estimate of 1.8 percent and the Korea Development Institute’s 1.6 percent expansion. The report noted that “growth in both (South) Korea and Australia is expected to hold up but will be weaker than previously anticipated.”
Looking further ahead, the OECD projects South Korea’s economy will grow by 2.2 percent in 2026, a slight increase of 0.1 percentage point from its earlier December projection. The organization also highlighted “further fragmentation” of the economy and higher-than-anticipated inflation as significant risks to the global economy.
The OECD also issued policy recommendations, emphasizing that the central bank should consider high uncertainty and potential increases in trade costs in its monetary policy decisions. South Korea’s benchmark interest rate is currently at 2.75 percent, following the BOK’s most recent quarter-percentage-point cut in February.
Furthermore, the report stressed the need for maintaining “fiscal discipline” to ensure the government has the capacity to respond effectively to future economic shocks.