OECD LOWERS KOREA’S GROWTH OUTLOOK

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The Organization for Economic Cooperation and Development(OECD) has lowered its growth outlook for South Korea for next year to 1.8%. The OECD said that monetary tightening by major economies including the US will slow global growth, dealing a blow to South Korean exports.

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The OECD lowered its growth forecast for the South Korean economy next year to 1.8%. A 0.4 percentage points decline from its September projection. On November 10th, the KDI also forecast 1.8% expansion for the domestic economy next year. An overseas forecast has now also issued an outlook below 2%. The Korean economy expanded below 2% only twice in the past, during the 2009 financial crisis and the COVID-19 pandemic in 2020. The latest forecast shows current economic conditions at home and abroad are that tough. The OECD believes the prolonged war in Ukraine has triggered the most serious energy crisis since the 1970s where high inflation and slow growth are occurring at the same time. According to the OECD, this will inevitably lead to reduced spending across the globe, adversely impacting Korea's export-dependent economy. China's persistent zero Covid policy is also thought to negatively affect Korean exports. As for inflation, the OECD expects consumer prices in Korea will rise 3.9% next year and that interest rate hikes, aimed at taming inflation, will serve to slow recovery in private consumption. The agency voiced concerns over the rising interest burden on households and businesses when paying back loans but still advised that monetary tightening should continue for a certain period to stabilize prices. The BOK is set to decide on its key rate on Thursday. During the meeting, the central bank may also lower its existing growth forecast for next year of 2.1%. Regarding the global economy, the OECD maintained its previous forecast of 2.2% growth for next year.