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OECD Economic Outlook predicts 2.8% GDP growth for Korea next year

The OECD Economic Outlook has predicted Korea’s gross domestic product will grow from 2.6 percent to 2.8 percent in 2018, according to its latest report released Wednesday.

The OECD Economic Outlook is the Organization for Economic Cooperation and Development’s twice-yearly analysis of major economic trends and prospects.

“GDP growth declined in the latter part of 2016 in the context of political uncertainty, corporate restructuring and a drop in exports,” the report said. “Assuming that domestic and international political uncertainty dissipates, growth is projected to edge up to 2.8 percent in 2018, supported by a pick-up in exports and rising business and consumer confidence.”

The OECD outlook attributed the projected GDP increase from this year’s 2.6 percent to 2.8 percent in part to faster world trade, which will boost exports and business investments and help to offset a gradual decline in the growth of residential investment. The report, however, added that China’s continued decisions to cut Korean imports and ban Chinese tour groups may lower GDP growth my 0.2 percentage point.

The OECD outlook also stipulated that gradually reducing the degree of monetary accommodation by raising the policy rate from its all-time low of 1.25 percent would benefit in keeping inflation in check and help contain the country’s spiking household debt, noting the growth of lending to households remains high.

“A supplementary budget is needed to support growth in 2017,” the report said. “The measures to restrain mortgage lending will have to be carefully calibrated to achieve a soft landing in the housing market and stabilize household debt.”

The report was released in time for the 2017 OECD forum on Wednesday in Paris under the theme “Making globalization work: Better lives for all.” The forum will be followed by the Ministerial Council Meeting, which will be held Thursday and Friday and chaired by Denmark, with Australia and the United Kingdom as vice chairs.

By Julie Jackson (