South Korea’s economy is expected to shrink minus 0.8 percent this year, the Organization for Economic Cooperation and Development said Tuesday, lifting it from the previous forecast of minus 1.2 percent and propelling the country to No. 1 in terms of growth rate.
Asia’s fourth-largest economy became the first among OECD’s 37 member nations to have its growth forecast adjusted upward from the international organization’s earlier projections announced in June, a biannual economic report by OECD showed. The report titled “OECD Economic Surveys: Korea 2020” was released here via Ministry of Economy and Finance.
The ministry cited the Korea’s second-quarter gross domestic product growth rate behind the improved figure. The economy declined 3.3 percent on-year in the second quarter, but ranked second in terms of GDP growth rate among major economies, separate data by OECD showed Sunday.
The report also portrayed the dire situation that the global economy faces under the novel coronavirus, with all member nations posting negative growth forecasts. Turkey and Japan each ranked No. 2 and No. 3 with minus 4.8 percent and minus 6 percent, respectively. Germany and the United States trailed behind at No. 4 and No. 5 with minus 6.6 percent and minus 7.3 percent, respectively.
On top of lifting its growth forecast, OECD highlighted Korea’s handling of the COVID-19 pandemic, saying that its “prompt reaction and an effective containment strategy allowed to limit the spread of the disease.” It added that the nation has been among the most successful nations in the world in containing the spread of the virus, without locking down any city or region, which minimized the economic impact.
The forum of 37 nations also expressed anticipation of the government’s 114 trillion won ($133 billion) “Korean New Deal” package announced in July, which aims to stimulate the nation’s economy and job market in the post-COVID era via digital and green pillars.
“The recently announced Korean New Deal, which will boost digital, green and skills investments, has the potential to support a green and inclusive recovery,” it said.
“Increased support for the transition toward renewable energy and clean technologies would strengthen the second phase of the recovery, in which fiscal multipliers will be higher,” it added.
But at the same time, the latest pandemic has “hit employment hard, albeit less than in most other countries,” OECD noted.
Korea’s aging society and shrinking labor supply due to abrupt changes in the demographic structure could drag down growth potentials and increase fiscal pressure, it said. The decline of non-regular workers due to the latest pandemic is a concern as well.
The organization highlighted the need to improve conditions of female, senior and youth employment to resolve issues related to the job market.
Meanwhile, President Moon Jae-in gave a nod to OECD’s move to lift Korea’s growth forecast, in a meeting held Tuesday morning.
“With swift economic measures from fiscal expansion and strong pursuit of Korean New Deal, South Korea is being assessed as a nation with the strongest defense and at the forefront, while anticipated as No. 1 in GDP growth rate among 37 OECD member nations,” Moon said.
By Jung Min-kyung (email@example.com