OECD Projects South Korea's Growth Rate at -1.2% This Year... -2.5% If COVID-19 Spreads

[Asia Economy Reporter Jang Sehee] The Organisation for Economic Co-operation and Development (OECD) has forecast that South Korea's economic growth rate this year will fall short of the initially expected 2.0%, reaching -1.2%. It predicted that if the novel coronavirus disease (COVID-19) experiences a second wave, the growth rate will drop to -2.5%. The OECD evaluated that unprecedented and diverse government policies have mitigated the shock caused by COVID-19.

In its '2020 Economic Outlook' released on the 10th, the OECD revised South Korea's growth forecast for this year downward by 0.8 percentage points from the March estimate, and projected that South Korea's growth rate in 2021 will be 3.1% without a second wave and 1.4% if a second wave occurs.

The OECD analyzed that South Korea's sluggish growth is due to a contraction in private consumption caused by income reduction and an increase in unemployment centered on non-regular workers. It suggested that if COVID-19 resurges during the year, the global economic downturn will affect South Korean exports, leading to reduced investment and employment.

However, it assessed that the economic contraction was limited due to the government's effective quarantine measures.

The OECD recommended that the South Korean government, households, and small and medium-sized enterprises be supported promptly and continuously, with additional measures possible based on sound fiscal management. While budget allocation for economic stimulus is necessary, it emphasized the need for rules regarding the pace of debt accumulation and long-term fiscal management.

Meanwhile, the OECD significantly downgraded growth forecasts for many major countries. This year, the growth rates for the United States, the Eurozone, and China were lowered to -7.3%, -9.1%, and -2.6%, respectively.

This content was produced with the assistance of AI translation services.