September 20, 2022
SEOUL – The Organization for Economic Cooperation and Development on Monday predicted that the gross domestic product growth of South Korea would stay in the low 2 percent range next year.
In particular, the Paris-based OECD forecast that the nation’s exports and private consumption would post slower-than-expected growth in 2023.
In the 2022 OECD Economic Survey of Korea, the organization revised its outlook on the 2023 GDP growth of Korea to 2.2 percent, from its suggestion of 2.5 percent in June, pointing to several uncertainties.
It said possible unfavorable factors surrounding the Korean economy include the prolonged war between Ukraine and Russia, China’s lockdown of major cities and geopolitical risks on the Korean Peninsula.
“Russia’s invasion of Ukraine is weighing on economic activity and exposes supply chain dependencies,” it said. “A dependence on the two countries for raw materials to produce semiconductors highlights the need for resilience and diversification in the sourcing of key inputs for industry.”
The OECD revised its projection on the 2023 export growth of Korea down to 3.2 percent, from its earlier suggestion of 4.1 percent. It also cut the outlook on the private consumption from 2.9 percent to 2.4 percent.
In addition, the nation’s inflation is projected to reach 3.9 percent next year, compared to earlier suggestion of 3.8 percent.
Its recommended that Korea “continue to move towards a less accommodative monetary policy stance with a view to keep inflation expectations in check.”
For the 2022 outlook, the OECD revised upward its forecast on the GDP of Korea to 2.8 percent from its earlier suggestion of 2.7 percent.
“Employment has surpassed pre-crisis levels, led by health and public services jobs and job creation programs,” it said. “Manufacturing jobs have recovered to pre-crisis levels, while contact-intensive services lag behind.”
It also said the preemptive moves have helped keep inflation expectations anchored.
Nonetheless, the organization predicted the export growth is projected to stay at 4.7 percent this year, while its earlier suggestion reached a 9.2 percent growth.
The OECD hinted that high increases in consumer prices are restricting growth, revising the 2022 inflation figure upward to 5.2 percent, from its earlier estimate of 4.8 percent.
Meanwhile, the International Monetary Fund had revised its outlook on the 2022 and 2023 growth of Korea to 2.3 percent and 2.1 percent, from its earlier suggestions of 2.5 percent and 2.9 percent, respectively.
In a meeting at the Government Complex Sejong on Monday, Korea’s Deputy Prime Minister and Finance Minister Choo Kyung-ho said the government would extend the expiry of offering subsidies diesel vehicle drivers to the end of the year in a bid to help ease their cost burden from high energy prices.
In May, the government launched the subsidy scheme for cargo truck drivers and others using diesel vehicles in the wake of tight supply and high prices amid the Ukraine-Russia war.
While the support measure was supposed to end this month, policymakers have decided to extend it by three months, according to the Finance Ministry.
Choo also said the central government will closely collaborate with local governments in an attempt to prevent public utility charges in regional areas from sharply hiking.