The Organization for Economic Cooperation and Development (OECD) has raised its economic growth forecast for South Korea in 2024, increasing it from the low 2% range to the mid-to-high 2% range. According to an announcement on April 2, the OECD now predicts a growth rate of 2.6% for South Korea this year, marking a significant uptick from the previous projection of 2.2% in February. This places South Korea alongside the United States as one of the most promising growth prospects among OECD member nations with a per capita income of $30,000 or more.
The upward revision of 0.4 percentage points in the growth projection exceeds the OECD’s global growth projection increase of 0.2 percentage points. A spokesperson from the Ministry of Economy and Finance commented, “This suggests that the OECD anticipates a more positive trajectory for South Korea’s economic recovery this year than initially anticipated.”
According to the Finance Ministry, the OECD indicated that the overall South Korean economy is expected to move beyond a temporary “soft patch” and strengthen its growth trajectory. The report further forecasts a revival in domestic demand, which has been hampered by high inflation, likely to be supported by anticipated interest rate cuts in the latter part of the year.
Identifying population aging as a vulnerability for the South Korean economy, the OECD recommended structural reforms in labor and fiscal policy, as well as the state pension service. Proposed measures include policies to promote work-life balance, expand the inflow of foreign labor, boost youth employment, and introduce fiscal rules. The OECD also suggested implementing pension reforms to ensure retirement security and sustainability.
The adjustment in the OECD’s forecasts aligns with clear signs of recovery in the South Korean economy, as evidenced by first-quarter Gross Domestic Product (GDP) performance. According to the Bank of Korea (BOK), South Korea’s real GDP expanded by 1.3% in the first quarter compared to the previous quarter, marking the highest growth in two years and three months since the 1.4% growth in the fourth quarter of 2021, with a year-on-year growth rate of 3.4%.
For 2025, the OECD has revised South Korea’s growth rate forecast to 2.2%, up by 0.1 percentage point from previous estimates, positioning South Korea alongside Australia with the highest growth rate among G20 countries with a per capita income of over $20,000.
Regarding South Korea’s inflation trend, the OECD forecasts a gradual stabilization towards the end of this year, with the inflation rate expected to decrease from 3.1% last year to 2.6% and further to the central bank’s inflation target of 2.0% by 2025.
