OECD Adjusts South Korea's Economic Growth Projection for 2025

In its latest "Economic Outlook Report" published on December 4, the OECD has revised its forecast for South Korea's GDP growth in 2025 to 2.1%. This adjustment marks a slight decrease from the previous projection of 2.2%.

Despite this revision, the OECD's forecast still exceeds those of the IMF and KDI, both at 2%, and the Bank of Korea's forecast of 1.9%. For the current year, the OECD now projects a growth rate of 2.3%, down from the 2.5% forecast in September.

The OECD's analysis indicates that robust global demand will continue to support South Korean exports, and private consumption is expected to rise from the end of this year due to falling interest rates and increasing real wages. However, the recent declaration of martial law has not yet been factored into these forecasts.

In terms of inflation, the OECD projects South Korea's rate for next year at 1.8%, a decrease from the previous forecast of 2%. For this year, inflation is expected to be 2.4%, down from the earlier forecast of 2.5%. Additionally, the OECD forecasts that South Korea will lower its base interest rate to 2.5% next year.

The OECD anticipates that inflation will fall below the target in the short term, while the unemployment rate will remain low. It also predicts that increased labor market participation by women and the elderly will boost employment. Furthermore, the organization notes that next year, the tax revenue shortfall from the past two years will partially recover, leading to fiscal consolidation.

The OECD interprets that pension reform and the introduction of fiscal rules will alleviate the fiscal burden of aging-related expenditures. It also suggests easing labor shortages through immigration and improving job matching through labor market reforms.