OECD slashes S. Korea’s 2023 growth outlook to 1.6 pct

The Organization for Economic Cooperation and Development (OECD) on Friday revised down South Korea’s growth outlook for 2023 to 1.6 percent, as the global economy continues to stand on “fragile” grounds amid uncertainties.

The latest outlook, released through the Paris-based organization’s interim report, marked a 0.2 percentage-point drop from a 1.8 percent growth projection in November.

The downward revision is in line with the Bank of Korea’s assessment released in February, when the central bank lowered its growth outlook from the previously predicted 1.7 percent. The OECD, however, revised up the forecast for 2024 by 0.4 percentage point to 2.3 percent.

The OECD also estimated South Korea’s inflation for 2023 at 3.6 percent, down 0.3 percentage point from its previous outlook.

The inflation outlook is slightly above the 3.5 percent estimated by the central bank last month.

South Korea has been grappling with inflation following soaring energy costs amid the prolonged war between Russia and Ukraine, although its on-year growth in consumer prices fell below 5 percent for the first time in 10 months in February amid monetary tightening moves.

The central bank kept the benchmark interest rate unchanged at 3.5 percent last month due to concerns that aggressive monetary tightening could hurt economic growth. It marked the first freeze after seven straight increases delivered since April last year intended to tame inflation.

The OECD, meanwhile, hinted the global economy will gradually recover through 2024 following improved consumer sentiment, falling energy and food prices, along with the full-fledged reopening of the Chinese economy.

“Korea and Australia will benefit from the expected growth rebound in China, offsetting the impact of tighter financial conditions,” the OECD said in a statement.

It added China’s neighboring Asian countries could also benefit from the resumption of overseas travel by its people.

The organization nevertheless pointed out the global economy still faces more downward risks, as it is standing on a “fragile” foundation amid uncertainties, including the war and fragmentation of supply chains, as well as global monetary tightening moves.

“In addition, sharp changes in market interest rates and in the current market value of bond portfolios could also further expose duration risks in the business models of financial institutions, as highlighted by the failure of the US Silicon Valley Bank in March,” the OECD added.