South Korea’s growth outlook downgraded by OECD amid trade pressures

The Organisation for Economic Co-operation and Development (OECD) has cut its forecast for South Korea’s economic growth in 2025 to 1.0%, down 0.5 percentage points from its previous estimate of 1.5% issued just over three months ago. The downgrade reflects weakening exports, driven in part by rising tariff pressures from the United States and broader global uncertainty.

Mathias Cormann, Secretary-General of the Organisation for Economic Co-operation and Development (OECD), attends the presentation of the OECD Economic Outlook ahead of the 2025 Ministerial Council Meeting at the OECD headquarters in Paris, France, on Jun. 3. /AP-Yonhap News

In its global economic outlook released on Jun. 3, the OECD projected that South Korea’s export-driven economy would face increasing headwinds from global trade tensions and reduced investor confidence. The organization had already revised South Korea’s 2025 growth projection once earlier this year—from 2.1% in December 2024 to 1.5% in March—before lowering it again. Among G20 countries, South Korea’s downward revision was the second steepest, following only the United States, which saw a 0.6 percentage point cut.

Despite the adjustment, the OECD forecast remains more optimistic than those issued by several major global investment banks, many of which expect growth in the zero percent range. It also stands slightly above the Bank of Korea’s 0.8% projection released on May 29 and matches the current estimate by the International Monetary Fund (IMF) at 1.0%. The OECD noted that private consumption is expected to recover in the second half of the year, supported by easing political uncertainty and a rise in real wages.

On monetary policy, the OECD recommended further easing to support investment, given the ongoing weakness in domestic demand. In terms of fiscal policy, it acknowledged the potential short-term need for public spending but stressed the importance of a sustainable long-term fiscal framework in light of the country’s rapidly rising national debt.

The OECD also revised its global growth forecast for 2025 downward from 3.1% to 2.9%, citing risks such as growing trade barriers, persistent inflationary pressure, and potential instability in financial markets as risk assets undergo repricing.

For the United States, the OECD expects economic growth to slow to 1.6% in 2025, down from a previous forecast of 2.2%, due to the rising impact of effective tariff rates and retaliatory trade measures by partner countries.