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OECD's projected growth rate for S. Korea

The Organisation for Economic Cooperation and Development (OECD) has raised its projection for South Korea’s economic growth rate this year from -1.2% to -0.8%. Since releasing projections for all member states back in June, the OECD has published separate reports for the US and three other countries, but South Korea is the first country whose projected growth rate has been revised upward.

In its report on the South Korean economy in 2020, released on Aug. 11, the OECD predicted that the country’s growth rate this year would be -0.8%, presuming there’s not a second wave of COVID-19. The OECD also said the growth rate would be -2.0% if there’s a second wave, which was also 0.5 points higher than its initial projection. At -0.8%, South Korea’s projected growth rate was the highest of the OECD’s 37 member states, which was also true of the June projections.

Every two years, the OECD publishes a comprehensive analysis and assessment of each member state’s economic trends and policies. The report for South Korea was due to be released in May, but that was delayed until August because of the impact of COVID-19.

The OECD gave South Korea high marks for its expansionary fiscal policy and its response to COVID-19. The report noted that South Korea has minimized economic harm while controlling the disease without imposing any lockdowns. South Korea’s employment and growth rate have not fallen nearly as much as other OECD countries, the report also observed. The South Korean government has made appropriate use of its fiscal resources to blunt the impact of COVID-19, the report said, and it should continue using fiscal policy to stimulate the economy.

But the OECD predicted that the global economic recession will slow South Korea’s recovery. Even assuming that South Korea doesn’t face a second wave of COVID-19, the global economic downtown will cause a contraction in exports and investment. Given its export-oriented economic structure, South Korea is vulnerable to an additional contraction of demand from overseas and to a lasting collapse of the global value chain, the report said.

The OECD’s assessment was also evident in its growth rate projections for individual sectors. Even as the overall economic growth rate projection (-0.8%) rose 0.4 points, the projection for exports actually got worse. Presuming no second wave, exports are projected to fall by 5.7%, even more than the initial projection of -2.6%. On the other hand, total investment moved from negative to positive territory (-0.7% to 2.9%) while the slowdown in consumer spending also eased up (-4.1% to -3.6%), which may help boost the growth rate.

By Lee Jeong-hun, staff reporter

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