OECD ups Korea's growth forecast to 2.6 percent

The OECD raised Korea's growth forecast to 2.6 percent due to strong chip demand and rebounding exports.

Containers for exports are stacked at a port in the southeastern city of Busan on April 1. [NEWS1]

The Organisation for Economic Cooperation and Development (OECD) lifted its growth forecast for Korea this year by 0.4 percentage points as the global economy recovers at a stronger-than-expected, but diverging pace.

The OECD predicted that Korea’s economy would grow 2.6 percent this year in its biannual economic outlook report published on Thursday, adjusting its projection upward from the 2.2 percent figure announced in the organization’s February interim report.

It is one of the most robust growth projections among OECD member nations. Korea now ranks fourth and shares the top spot with the United States among members with a per capita income of $30,000 or more.

The figure surpasses the International Monetary Fund's (IMF's) April prediction of 2.3 percent for Korea and the Ministry of Economy and Finance’s 2.2 percent. The Bank of Korea expects the country’s economy to grow 2.1 percent this year.

The OECD mentioned that the Korean economy's “growth is projected to strengthen,” propelled by robust chip demand and a resulting rebound in exports, according to the Finance Ministry’s release.

Domestic demand, which has been weighed down by high inflation, will likely rebound, with rate cuts expected in the latter half of the year, the report said.

The OECD recommended structural reforms to the state pension service as well as labor and fiscal policy, as Korea currently faces a rapidly aging population and plunging birthrates.

The organization also revised up its projection for the global economy to 3.1 percent this year, up 0.2 percentage points from the February estimate.

While noting that strong employment and easing of inflation will gradually mitigate risks, the organization pointed out that significant uncertainty still remains, citing the persisting impact of high commodity prices and interest rates, geopolitical issues, potential financial market contraction driven by delayed rate cuts and China’s weaker-than-expected growth.

Meanwhile, the OECD projected Korea’s inflation to reach 2.6 percent this year, which is down 0.1 percentage points from the previous estimate and below the OECD average of 4.8 percent.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]