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 2025 growth outlook to 1%
A man passes by the headquarters of the Organization for Economic Cooperation and Development (OECD) in Paris in this 2017 June file photo. AP-Yonhap
By Yi Whan-woo
The Organization for Economic Cooperation and Development (OECD) slashed its 2025 economic growth forecast for Korea to 1 percent, Tuesday, down from its earlier 1.5 percent announced in March.
In its assessment, the OECD said that U.S. tariff-driven uncertainty is “set to hold back export growth and weaken business investment,” although domestic political uncertainty is expected to subside and, along with an increase in real wages, help private consumption pick up starting in late 2025.
“Korea has considerable trade exposure to the U.S., directly and through its participation in global value chains,” the Paris-headquartered organization said, noting effective tariff rates applying to Korean exports to the U.S. have increased from 1 percent to 16 percent.
It went on to say that business and consumer confidence is “tested by an uncertain environment” as the level of confidence is growing, but “uncertainty related to tariffs and international trade pulls in the opposition direction.”
“A prolonged slowdown in key trading partners and spiraling protectionism could further strain Korea’s trade-dependent economy,” it added.
The OECD suggested that any additional fiscal support should be “complemented by a sustainable long-term fiscal framework.”
With regard to the Bank of Korea’s (BOK) rate-cutting cycle, the organization said, “Further monetary policy loosening is warranted considering weak domestic demand.”
It viewed that labor market reform “can boost growth, reduce elderly poverty and lessen the high opportunity cost of motherhood.”
The OECD’s downward revision of Korea’s 2025 growth outlook corresponds with gloomy economic projections for the country from both domestic and overseas financial institutions.
The International Monetary Fund estimated the growth rate at 1 percent, while the BOK was more skeptical and estimated the rate at 0.8 percent.
The average forecast from 41 institutions surveyed by Bloomberg stood at 0.985 percent. They include France-based Societe Generale, which offered a forecast of just 0.3 percent.
The OECD’s pace of cut in growth projection for Korea was more severe compared to the world average, whose economic growth outlooks for this year were revised down to 2.9 percent from 3.1 percent.
For the Group of 20 economies, the growth projection was also lowered to 2.9 percent from 3.1 percent.
The growth outlook for the U.S. fell to 1.6 percent from 2.2 percent. The estimated growth rate for China dropped to 4.7 percent from 4.8 percent, and for Japan went down to 0.7 percent from 1.1 percent.
For next year, the OECD kept Korea’s growth outlook steady at 2.2 percent.
Concerning inflation, the organization estimated that it would grow 2.1 percent in Korea this year, up from its previous outlook of 1.9 percent.
For 2026, it revised down the inflation rate in Korea to 2 percent from 2.1 percent.