OECD cuts 2023 growth forecast for Korea to 1.5% from 1.6%

The Korea Times

The Korea Times

Finance

Mon, October 2, 2023 | 07:22

Economy

OECD cuts Korea's 2023 growth forecast to 1.5% from 1.6%

Posted : 2023-06-07 16:52

Updated : 2023-06-08 09:11

The logo of the Organization for Economic Cooperation and Development is seen in this 2021 photo. Korea Times file

Global economic outlook revised up to 2.7%

By Yi Whan-woo

The Organization for Economic Cooperation and Development (OECD) cut its 2023 economic growth outlook for Korea to 1.5 percent from 1.6 percent, Wednesday, despite an upward revision of its global economic outlook.

The Paris-headquartered organization already lowered its growth estimate for Korea from 2.5 percent in June 2022 to 2.2 percent in September, 1.8 percent in November 2022 and 1.6 percent in March this year.

The OECD's latest forecast is on a par with dominant projections here and abroad that Korea's growth will slow down to the mid-1-percent level this year from the 2 percent range last year.

Nevertheless, such a growth forecast for the export-driven Korean economy can be a disappointment, considering the OECD projected that the global economy is on a recovery track.

The OECD revised up its global economic growth forecast to 2.7 percent from 2.6 percent.

The OECD even lowered next year's growth forecast for Korea to 2.1 percent from its previous estimate of 2.3 percent, while maintaining its outlook for the global economy at 2.9 percent.

The organization assessed weakened global demand, noticeably for semiconductors, "dampened exports considerably" for Korea along with sluggish demand from China.

"Together with a weak exchange rate since early 2022, noticeably against the U.S. dollar, this has resulted in a trade deficit," it added.

It went on to say, "Elevated debt servicing burdens and a sluggish housing market will continue to weigh on private consumption and investment in the short term."

The OECD, however, said consumer spending, one of the twin engines of the country's growth, is recovering after the lifting of pandemic restrictions.

Inflation in Korea was projected at 3.4 percent in 2023, down from a previous outlook of 3.6 percent in March.

It still warned that inflation will ease "only moderately," pointing out that the prices of utilities and services are poised to rise.

On Korea's path to tackle challenges against slowed growth, the OECD viewed the government's proposed ceiling on fiscal deficit and pension reform "would help to limit the build-up of fiscal pressure."

It said the pension reform to be announced in the second half of the year "should help to secure adequate retirement income and fiscal sustainability," while the extended fuel tax cut through August this year would be "better to target vulnerable groups more directly."

"Policies should also focus on reconciling career and family, including greater public financing or parental leave and expanding after-school care to boost female employment and fertility," the organization added.

yistory@koreatimes.co.kr