OECD slashes Korea's 2025 growth outlook to 1.5%

The Organization for Economic Cooperation and Development delivered a grim outlook for South Korea’s economy on Monday, slashing its growth forecast to 1.5 percent for this year — a sharp downgrade from its previous estimate.

In its March interim report on the global economy, the OECD cut South Korea’s growth projection by 0.6 percentage points from its December forecast of 2.1 percent. The revised outlook places Korea’s growth at less than half the global average of 3.1 percent and among the lowest in the G20. The OECD also trimmed its global growth forecast from 3.3 percent in December.

Titled “Steering through Uncertainty,” the report cited rising trade barriers and escalating geopolitical risks as key factors weighing on global economic growth, warning that these challenges could dampen investment and household spending.

While the global economy has “remained resilient,” recent indicators suggest a “softening of global growth prospects,” the OECD noted, projecting global growth to slow from 3.2 percent in 2024 to 3.1 percent in 2025 and 3 percent in 2026. The figure for 2026 marked a downgrade from the 3.1 percent forecast made in December.

Canada and Mexico, both heavily reliant on trade with the US and facing potential tariff hikes, are expected to be among the hardest hit. The OECD significantly revised their 2025 growth projections, cutting Canada’s forecast by 1.3 percentage points from 2 percent to 0.7 percent and Mexico’s by 2.5 percentage points, shifting its outlook from 1.2 percent growth to a 1.3 percent contraction.

Export-driven Korea followed with a 0.6 percentage point downward revision, marking the third-largest cut.

Meanwhile, the OECD's 1.5 percent growth outlook for Korea aligns with the Bank of Korea's latest forecast. In February, the central bank lowered its outlook from 1.9 percent in November and recently warned it may revise it further to 1.4 percent. The OECD and BOK’s projections are lower than the South Korean Finance Ministry’s 1.8 percent and the International Monetary Fund's 2 percent forecasts.

Growth in Korea is projected to "hold up, but to be weaker than previously expected," the report stated.

While global uncertainty is expected to persist, with the outlook for 2026 revised from 3.3 percent to 3 percent, the OECD slightly raised Korea's growth forecast for 2026 from 2.1 percent to 2.2 percent.

The OECD forecast that inflation pressures, which persist in several countries, could exceed expectations with significant changes in trade policies. It revised its consumer price outlook for G20 countries to 3.8 percent for this year, up from 3.5 percent in December, and to 3.2 percent for 2026, up from 2.9 percent.

Korea's consumer price outlook was also revised upward, to 1.9 percent in 2025 and 2.1 percent in 2026, each up by 0.1 percentage point.