OECD lowers Korea's 2023 growth forecast to 1.6%

Containers stacked at the port of Incheon on March 13 [NEWS1]

The OECD revised down Korea’s growth forecast for this year to 1.6 percent in its interim economic outlook Friday.

The OECD revised down the forecast by 0.2 percentage points from the previous projection made in November in the report with the subtitle “A Fragile Recovery.”

The revised 1.6 percent growth outlook matches the forecast made by the Bank of Korea in February. However, it is lower than the 1.8 percent projection made by the Korea Development Institute in the same month.

The OECD outlook for Korea is lower than its estimated average of 2.6 percent growth for the global economy this year.

The institution revised up the growth outlook for Korea next year to 2.3 percent, up 0.4 percentage points from the previous forecast in November. But the figure remains lower than the 2.9 percent growth outlook for the global economy.

“Korea and Australia will benefit from the expected growth rebound in China, offsetting the impact of tighter financial conditions,” said the OECD in its report. It added neighboring Asian countries will be the biggest beneficiaries of China’s resumption of travel.

The OECD forecast Korea’s inflation to reach 3.6 percent this year, down 0.3 percentage points from the November forecast. It revised up the inflation forecast for next year by 0.1 percentage points to 2.4 percent.

The improved outlook for the global economy remains “fragile,” said the OECD. It added the upside and downside risks have recently balanced out, but the downside risks remain bigger.

Geopolitical uncertainties caused by the Russia-Ukraine war that has weakened food security in emerging countries and supply chains that hinder growth and trigger inflation were cited as the reasons for the outlook. The collapse of financial institutions, unpredictable monetary tightening and their impacts on inflation was also mentioned.

“In addition, sharp changes in market interest rates and in the current market value of bond portfolios could also further expose duration risks in the business models of financial institutions, as highlighted by the failure of the U.S. Silicon Valley Bank in March,” the report said.

The OECD expects China to recover growth this year.

It forecasted 5.3 percent growth for China this year and 4.9 percent for next year.

The institution’s growth outlook for the United States this year is 1.5 percent and 0.9 percent for the following year. The projected growth for Eurozone is 0.8 percent in 2023 and 1.5 percent in 2024.

BY JIN MIN-JI [jin.minji@joongang.co.kr]