Semiconductors. [Reuters]
Semiconductors. [Reuters]

The OECD raised its growth forecast for South Korea this year to 2.6% from 1.7%, a 0.9 percentage point upgrade, citing a recovery in semiconductor exports, expanding private investment and a gradual pickup in consumer spending supported by fiscal policy. The organization published the revision Wednesday in its latest Economic Outlook report.

The OECD had cut its South Korea forecast in March to reflect the fallout from the Middle East conflict, but reversed course sharply this time on stronger-than-expected first-quarter GDP growth and a rebound in the semiconductor sector.

The revised figure matches the Bank of Korea's own projection and stands 0.1 percentage point above the Korea Development Institute's forecast of 2.5%. According to the government, South Korea's upward revision was the largest among G20 economies.

The OECD said growth could accelerate further if demand for advanced semiconductors proves stronger than anticipated. On the downside, it flagged supply disruptions from Middle East tensions, industrial disputes and export restrictions as key risks.

The organization put South Korea's growth rate for next year at 1.9%. It trimmed its consumer price inflation forecast for this year to 2.6% from 2.7%, and projected inflation of 2.2% next year.

The OECD recommended that government support in response to energy price shocks be targeted at vulnerable households and businesses, while fuel tax cuts and energy price regulations are phased out gradually.


rim@heraldcorp.com