OECD Lowers South Korea's Economic Growth Forecast for This Year from 2.1% to 1.5%

Korea Economic Daily

Summary

The OECD reported that it has lowered South Korea's economic growth forecast for this year from 2.1% to 1.5%.
It stated that rising trade barriers due to Trump's tariffs are expected to burden investments and household spending.
The report analyzed that South Korea has a high trade dependency, making it vulnerable to trade disputes, which is reflected in this downward adjustment.

Reflecting Concerns about Vulnerability to Trump-driven Trade Tensions

U.S. Growth Also Lowered to 2.2% This Year, 1.6% Next Year

The OECD has lowered South Korea's growth forecast for this year from 2.1% to 1.5%, a 0.6 percentage point reduction. It estimates that Korea will grow by 2.2% in 2026.

On the 17th, the Organization for Economic Cooperation and Development (OECD) estimated in its '2025 Economic Outlook' report that global GDP growth will slow slightly from 3.2% in 2024 to 3.1% this year and 3.0% in 2026. This is lower than previous forecasts of 3.3% for both this year and next year.

The OECD predicted that trade barriers initiated by Trump's tariffs will rise in G20 economies this year, and increasing policy uncertainty will burden major countries' investments and household spending.

For South Korea, which has a high trade dependency, the downward revision of this year's growth forecast is significant. Excluding Mexico (2.5 percentage points lower) and Canada (1.3 percentage points lower), which are heavily affected by Trump's tariffs, Korea is among the countries with the largest declines. This appears to reflect concerns about the significant impact of trade disputes, including Trump's tariffs on major export items.

The annual real GDP growth rate of the United States, which has been growing at a robust pace recently, is expected to slow to 2.2% this year and 1.6% in 2026.

The eurozone's real GDP growth rate is also estimated to be 1.0% this year and 1.2% in 2026 due to increased uncertainty. China's growth rate is expected to slow from 4.8% this year to 4.4% in 2026, while Japan is forecast to record 1.1% this year and 0.2% in 2026.

The OECD stated that the global economy maintained resilience in 2024, expanding at a solid pace of 3.2% annually through the second half. However, it mentioned that recent activity indicators suggest the global growth outlook is weakening.

It pointed out that business and consumer sentiment has weakened in some countries, and inflationary pressures are rising in several economies. In particular, it emphasized that high policy uncertainty and further fragmentation of the global economy are significant concerns.

Kim Jung-a, Contributing Writer kja@hankyung.com