OECD slashes Korea's growth projection to 2.5 percent

The OECD and ADB both project Korea's economic growth to be 2.5% for 2024, citing strong exports but weakened domestic demand.

President Yoon Suk Yeol speaks at an annual meeting of Asian Development Bank last year. [JOINT PRESS CORPS]

The Organisation for Economic Cooperation and Development (OECD) slashed its projection for Korea's 2024 economic growth by 0.1 percentage point to 2.5 percent as weaker-than-expected domestic demand impedes the expansion of the country's GDP. The adjustment came after the institution significantly upped the same projection from 2.2 percent to 2.6 percent in May of this year.

“Growth is projected to be stable in Korea, at 2.5 percent this year and 2.2 percent in 2025, with exports aided by ongoing strength in global semiconductor demand,” the OECD said in its report released Wednesday. The organization expects the overall economy to remain resilient and inflation to subside in a gradual manner.

Meanwhile, the Asian Development Bank (ADB) held its outlook for Korea's economic growth this year at 2.5 percent given strong exports, the Finance Ministry said Wednesday.

The bank raised the outlook by 0.3 percentage point in July and maintained the level for the latest forecast.

The prediction is on a par with the forecasts from the International Monetary Fund and the Bank of Korea.

The Korean government, in line with the OECD, projected a 2.6 percent expansion.

The ADB maintained its growth projection for 2025 at 2.3 percent.

The Manila-based bank cited strong global demand for Korean semiconductors and automobiles, among other items, as a main growth engine.

Exports rose 11.4 percent on year to $57.9 billion, the 11th consecutive monthly gain, in August on the back of solid chip sales, according to government data.

The bank also kept its inflation forecast unchanged at 2.5 percent for this year and 2 percent for next year.

For the broader Asia-Pacific region, the ADB presented a 5 percent expansion projection this year, pointing to the upcycle of the semiconductor industry and rising demand for electronics.

As major risk factors, it pointed to concerns about protectionism following the election results in the United States, deepening geopolitical tensions in the Middle East, the slump in the Chinese real estate market and weather conditions, the ministry said.

Update, Sept. 25: Added an OECD projection.

BY PARK EUN-JEE, YONHAP [park.eunjee@joongang.co.kr]