OECD Adjusts South Korea's Economic Outlook

The Organisation for Economic Co-operation and Development (OECD) has revised South Korea's GDP growth forecast for 2025 downwards from 2.1 percent to 1.5 percent, marking a significant 0.6 percentage point reduction. This adjustment positions South Korea as the third most affected among G20 nations, trailing behind Mexico and Canada, both of which have been heavily impacted by U.S. tariffs. This revision underscores the potential risks that U.S. President Donald Trump's tariff policies pose to South Korea's export-oriented economy.

Comparative Growth Forecasts

According to the Ministry of Economy and Finance, the OECD's latest 'Economic Outlook Report' not only adjusts South Korea's growth forecast for 2025 but also slightly raises the expectation for 2026 by 0.1 percentage points to 2.2 percent. This contrasts with the more optimistic forecasts from other institutions like the IMF, which predicts a 2.0 percent growth.

Risk Factors and Recommendations

The OECD highlighted several challenges facing South Korea, including global economic fragmentation due to trade barriers, monetary policy constraints, financial market volatility, and long-term fiscal pressures from increased government spending. Despite these risks, the OECD also pointed out potential positive developments, such as tariff reductions through trade negotiations and the resolution of geopolitical conflicts. The organization emphasized the importance of controlling inflation through monetary policy, ensuring fiscal sustainability, and enhancing economic resilience by diversifying supply chains and reducing restrictive regulations.