Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
OECD lowers Korea's 2023 GDP growth outlook to 1.4%
Packed fruit is on display at a supermarket in Seoul, Wednesday. Yonhap
By Yi Whan-woo
The Organization for Economic Cooperation and Development (OECD) lowered its 2023 economic growth outlook for Korea to 1.4 percent, Wednesday, after keeping it steady at 1.5 percent in its previous forecast given in September.
The downward revision, according to the OECD, reflects a moderate slowdown of the global economy, which is estimated to grow 2.9 percent, down from 3 percent in the previous outlook made two months earlier.
The Paris-headquartered organization raised its forecast for Korea’s inflation this year to 3.6 percent from 3.4 percent. It also elevated its inflation forecast for the G20 economies to 6.2 percent from 6 percent.
It assessed that loan repayments as well as surging inflation weigh on Korea’s private spending and investment in the short term.
Nevertheless, the organization assessed that Korea’s exports have bottomed out thanks to a recovery in global chip demand and that its trade-reliant economy shows increasing signs of recovery.
Correspondingly, the OECD increased next year’s economic growth forecast for Korea to 2.3 percent from 2.1 percent. For the global economy, the forecast remained unchanged at 2.7 percent.
The organization said high costs of energy and food increase the burden on Korea’s efforts to tame consumer price growth, as it revised up the 2024 inflation forecast for the country to 2.7 percent from 2.6 percent.
However, it said the pace of consumer price growth is easing thanks to monetary tightening and an anticipated fall in global energy prices, and that the increase in inflation will eventually moderate to Korea’s target of 2 percent by 2025.
For 2024, the inflation forecast for the G20 economies was revised up to 5.8 percent from 4.8 percent.
In its policy recommendations, the OECD said Korea should cope with fiscal soundness by taking into account expenses related to a rapidly aging society, such as retirement pension and health care.
It also suggested reducing the productivity gap between large and smaller businesses through regulatory reforms and support for small and medium-sized enterprises (SMEs).
Meanwhile, this year's growth forecast for the United States was revised up by 0.2 percentage point to 2.4 percent.
Of other major economies, China saw its 2023 growth outlook raised by 0.1 percentage point to 5.2 percent, while the United Kingdom also saw an increase of 0.2 percentage point to 0.5 percent.
The forecast for Japan was lowered by 0.1 percentage point to 1.7 percent, while the economic growth outlooks for France and Italy were lowered to 0.9 percent and 0.7 percent, respectively.