OECD lowers Korea’s 2025 growth outlook to 1.5% from 2.1% due to tariff uncertainties

OECD Secretary-General Mathias Cormann, third from right, speaks during the OECD Social Policy Ministerial and High-Level Policy Forum at the OECD headquarters in Paris, Feb. 14. EPA-Yonhap

The Organisation for Economic Cooperation and Development (OECD) slashed Korea's 2025 economic growth forecast to 1.5 percent, Monday, from earlier outlook of 2.1 percent announced in December.

The new OECD forecast is similar to those of the Bank of Korea (BOK), the Ministry of Economy and Finance as well as some other state-run and private research institutions. Their outlooks for the Korean economy's growth this year range from 1.5 percent to 1.8 percent.

The downward revision for Asia's fourth-largest economy comes amid hostile tariff policies imposed by U.S. President Donald Trump on America's major trading partners and heightened economic uncertainties worldwide.

For Korea, the pace of cut was more severe compared to the world average, whose economic growth outlooks for this year was revised down from 3.3 percent to 3.1 percent.

The dimmed outlook is attributable to Korea's heavy reliance on exports, as it makes the country extremely vulnerable to trade and tariff conditions.

The growth rate for 2026 was estimated at 2.2 percent, the global organization added.

Major downside risks to the Korean economy include a potential severe global economic fragmentation due to expanding trade barriers, rising inflation and long-term fiscal pressure from greater defense spending and other government expenditures.

However, potential agreements on eased tariffs and a breakthrough in geopolitical conflicts could pose positive developments, according to the OECD.

The OECD recommended that the BOK continue to fight inflation and the finance ministry bolster fiscal sustainability.

The BOK should, the organization said, closely monitor that core inflation remains subdued, in the context of elevated uncertainty and rising trade costs concerns. The OECD also recommended fiscal soundness measures be outlined to ensure the sustainability of debt and buffer fiscal shocks and increased spending pressures.

Meanwhile, the OECD expected the U.S. to undergo slower growth due to its own tariff policy, including a 25 percent hike on taxes on imported goods from Canada and Mexico.

Correspondingly, the U.S. economic outlook for 2025 was slashed to 2.2 percent from 2.4 percent.

The growth projection for the G20 economies was revised down to 3.1 percent from 3.3 percent.

For the eurozone, uncertainties concerning geopolitical risks and regional policies are anticipated to curb its growth further this year, with the OECD's outlook for the region falling to 1 percent from 1.3 percent.

China is almost the only one among major economies to see its growth forecast increase — from 4.7 percent to 4.8 percent — as the world’s second-largest economy is anticipated to offset adverse effects from the U.S. tariff plan.