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Korea GDP growth is projected to decline to 1.5% in 2023 before picking up to 2.1% in 2024. China’s recovery should boost exports over time. Private consumption and investment will remain weak in the near term in response to higher interest rates and a sluggish housing market, but will pick up gradually in 2024. Inflation will continue to decline, but only moderately, with utilities and services price adjustments yet to come. Employment is set to contract from high levels and unemployment to rise from historical lows. The Bank of Korea has appropriately maintained the policy rate at 3.5% since January 2023 and signalled a data-driven approach going forward. Fiscal consolidation should proceed in view of rapid ageing, in line with the proposed fiscal rule. Support to households should become increasingly targeted to those that are not sufficiently protected by permanent social protection schemes. Structural reforms should facilitate the reallocation of labour and capital to expanding sectors and address high social protection gaps. The economy has slowed Real GDP grew by 0.3% in the first quarter of 2023, after a contraction in the previous quarter. Private consumption picked up, led by in-person services as the last pandemic curbs were lifted. High inflation and interest rates dragged down private investment. Exports and imports rebounded after a deep contraction in the fourth quarter of 2022. Headline inflation fell to 3.7% in April 2023, and core inflation remained largely unchanged at 4.0%, with services and utility prices increasing. Job creation has slowed after robust gains in 2022.
Korea
Source: OECD national accounts database; and Bank of Korea. StatLink 2 https://stat.link/hn2pmt
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 1: PRELIMINARY VERSION © OECD 2023