OECD forecast S. Korea’s growth outlook to hit record low in late 2027

Seoul, April 26 (IANS) South Korea’s potential growth rate is projected to fall to a record low in the fourth quarter of next year, continuing a decade-long downward trend, according to the Organization for Economic Cooperation and Development (OECD).

According to the latest OECD data, the country’s potential growth rate is projected to reach 1.52 percent in the October-December period of next year, a sharp decline from 1.92 percent last year and an estimated 1.71 percent this year. It is expected to fall further to 1.57 percent next year, reports Yonhap news agency.

The potential growth rate refers to the rate of increase in the potential gross domestic product (GDP), which represents the maximum level of output an economy can sustain by fully utilizing labor, capital and other resources without triggering inflation.

Based on the OECD’s latest estimates, South Korea’s potential growth rate has been on a steady decline since 2012, when it stood at 3.63 percent.

If the trend continues through next year, the decline will extend into its 15th consecutive year.

The data also highlights a widening gap with the United States. Since 2023, South Korea has trailed the world’s largest economy in potential growth. The disparity has grown from 0.03 percentage point in 2023 to a projected 0.38 percentage point next year.

Meanwhile, the International Monetary Fund (IMF) has kept its 2026 growth forecast for South Korea unchanged at 1.9 percent despite the Middle East crisis, the finance ministry said.

While keeping its outlook unchanged for Asia’s fourth-largest economy, the institution revised down its growth projection for the global economy by 0.2 percentage point from its January forecast to 3.1 percent, according to the Ministry of Economy and Finance.

“Despite the impact of the Middle East situation, the country’s growth outlook remained unchanged on the back of strong exports and offsetting effects from a supplementary budget,” the ministry said, citing the IMF’s latest World Economic Outlook report.

“The government will maintain the current emergency response system amid heightened uncertainties and swiftly implement measures to stabilise prices, supply chains and financial markets,” it added.

—IANS

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