OECD upgrades Korea’s growth outlook to -0.8%, mildest among member countries

South Korea's economy is likely to shrink less than expected this year, thanks to its successful response to the coronavirus pandemic, according to the Organization for Economic Cooperation and Development.

In its latest Korea Economic Report, the Paris-based club of major economies predicted Asia's fourth-largest economy will contract 0.8% in 2020 from a year earlier.

The revised growth forecast compares with the 1.2% contraction it projected in June and marks the mildest negative growth projection among the 37 OECD members.

South Korea is the only country among the OECD members to receive an improved outlook. The second-best performer is Turkey, which is expected to shrink 4.8%.

 



 

EFFECTIVE HANDLING OF COVID-19

The OECD said that while Korea suffered a slowdown from the COVID-19 outbreak, it has quickly and effectively handled the situation, leaving it much less susceptible to a contraction than other member countries. However, it said the Korean economy could shrink as much as 2% this year if the COVID-19 pandemic spins out of control.

The organization also praised the Korean government’s expansionary fiscal policy and measures to stabilize the financial market.

Yet, the OECD said Korea needs to maintain a soft monetary policy to shore up the economy and keep close tabs on the hot property market, warning against excess liquidity flows into the real estate sector.

The organization also warned of low labor productivity and how many workers' lack of work-life balance could work against the local economy.

The latest OECD forecast for South Korea is bleaker than the predicted 0.2% contraction by the Bank of Korea.

In late May, the central bank slashed its policy rate by a quarter percentage point to a record low of 0.5% in a bid to cushion the economic impact of the COVID-19 pandemic.

The novel coronavirus has infected 14,660 South Koreans since its first case confirmed on Jan. 20, with the country's death toll reaching 305.

Write to In-Seol Jeong at surisuri@hankyung.com