OECD revises down South Korea's 2025 growth outlook to 1 pc

Seoul, June 3 (IANS) The Organisation for Economic Cooperation and Development (OECD) has downgraded its forecast for South Korea's economic growth in 2025 by 0.5 percentage point from its previous estimate to 1 percent, citing mounting uncertainties at home and abroad, the finance ministry here said on Tuesday.

The downward revision marks the second of its kind in less than six months as the organization had reduced its growth forecast for Asia's fourth-largest economy to 1.5 percent in March from the 2.1 percent estimate presented late last year.

For 2026, the OECD maintained its forecast of 2.2 percent growth, reports Yonhap news agency.

The downward revision for South Korea marked the second-largest cut among major economies after the United States, whose growth outlook for 2025 was slashed from 2.2 percent to 1.6 percent. Japan's projection was lowered by 0.4 percentage point to 0.7 percent.

The OECD's updated forecast is broadly aligned with recent projections from the South Korean government and other global institutions.

Last month, the Bank of Korea cut its 2025 growth outlook to 0.8 percent from 1.5 percent, while the International Monetary Fund (IMF) halved its growth projection for the South Korean economy to 1 percent in April.

The OECD said South Korea's economy has been weighed down by the fallout from the short-lived imposition of martial law in December, which negatively impacted gross domestic product (GDP) in the first quarter. External factors, including uncertainty surrounding U.S. trade and tariff policies, as well as global trade tensions, are also expected to affect its exports and investment.

While fiscal stimulus is expected to provide short-term relief, the OECD warned that the government should establish a more sustainable fiscal framework to restore financial health over the longer term.

Earlier this month, the National Assembly passed a 13.8 trillion-won (US$10 billion) supplementary budget.

Further fiscal expansion is anticipated, as leading presidential candidates -- Lee Jae-myung of the Democratic Party and Kim Moon-soo of the People Power Party -- have both pledged expansionary fiscal policies.

--IANS

na/