OECD knocks Korea's growth forecast down to 2.2%

Finance

Published: 05 Feb. 2024, 19:15 Updated: 06 Feb. 2024, 09:27

OECD knocks Korea's growth forecast down to 2.2%

Container ships arrive at a port in Busan, southern Korea. [JOONGANG ILBO]

The Organization for Economic Cooperation and Development (OECD) lowered its growth forecast for Korea this year by 0.1 percentage points, while revising up its projection for the global economy by 0.2 percentage points.

IMF lifts Korea's 2024 economic growth forecast to 2.3%

The OECD projected Korea’s economy to grow 2.2 percent this year, a drop from its previous forecast of 2.3 percent that had been announced in November last year, in its latest interim economic outlook report released Monday. The 2025 projection remained flat at 2.1 percent.

The figure is lower than the International Monetary Fund's (IMF's) recently upped prediction of 2.3 percent for Korea and in line with the Ministry of Economy and Finance’s 2.2 percent figure.

The Bank of Korea expects the country’s economy to grow 2.1 percent this year.

The Finance Ministry said in a release that the OECD’s revision likely reflects the economic projection that the government announced on Jan. 4.

Korea’s inflation is expected to weaken this year to 2.7 percent and reach 2.0 percent by 2025, a slowdown from last year’s 3.6 percent, according to the OECD. Inflation is expected to rise among the G20 nations in general, however, from 6.3 percent in 2023 to 6.6 percent this year, and then to fall to 3.8 percent in 2025.

The organization predicted that the global economy will grow 2.9 percent in 2024, retaining “moderate” but more gradual pace compared to last year's 3.1 percent rate. The projection was revised upward from the 2.7 percent figure announced in November.

The group upped its growth outlook for the United States 0.6 percentage points to 2.1 percent from its November prediction thanks to robust spending and an anticipated base rate cut.

The OECD report cited the global economy losing momentum for growth since the end of last year, as well as the ongoing monetary tightening and structural uncertainties in the Chinese economy, for the slower on-year growth this year.

Possible risk factors for this year’s global economy include geopolitical uncertainties in the Middle East as well as other regions, which could lead to stronger inflation, as well as the debt burden caused by high base rates.

The OECD called for a cautious approach to monetary policy in order to retain downward pressure on inflation.

The IMF revised its forecast for Korea’s economic growth from 2.2 percent up to 2.3 percent on Jan. 31. The IMF did not specify its reasoning for that revision, but the revised outlooks for the United States and China — Korea's key trading partners — explain the raised projection, according to the ministry. The agency lifted its U.S. outlook to 2.1 percent this year from the previous 1.5 percent and that of China to 4.6 percent from 4.2 percent.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]