OECD cuts growth outlook for S. Korea to 2 percent

SEOUL, March 2 (Yonhap) -- The Organization for Economic Cooperation and Development (OECD) on Monday slashed its growth outlook for South Korea this year to 2 percent due to the coronavirus outbreak.

The estimate represents a drop from the OECD's previous forecast of 2.3 percent in November. It said the South Korean economy would grow 2.3 percent in 2021, unchanged from its previous forecast.

The OECD said global growth prospects remain highly uncertain as the COVID-19 outbreak has already brought considerable human suffering and major economic disruption.

"The adverse impact on confidence, financial markets, the travel sector and disruption to supply chains contributes to the downward revisions in all G20 economies in 2020, particularly ones strongly interconnected to China, such as Japan, Korea and Australia," the OECD said in its interim report.

China is South Korea's largest trading partner, and accounts for a quarter of South Korea's exports.

The latest downward revision came four days after South Korea's central bank slashed its growth estimate to 2.1 percent, from 2.3 percent forecast three months earlier.

Asia's fourth-largest economy grew 2 percent last year, its slowest growth in a decade. The nation's finance ministry has predicted the economy will grow 2.4 percent this year.

South Korea is pushing for an extra budget worth more than 6.2 trillion won (US$5.19 billion) to deal with economic fallout from the rapid spread of the coronavirus.

South Korea's 2020 budget of 512.5 trillion won is already the largest ever.

The number of COVID-19 infections in South Korea has risen to 4,335 with 26 deaths, and the country is speeding up the testing process under an all-out campaign to stem the virus' spread.

The OECD said lower policy interest rates and stronger government spending can help boost confidence and assist with the recovery of demand once the outbreak eases and travel restrictions are removed.

"Additional precautionary reductions in policy interest rates may also be merited in a number of economies particularly exposed to the coronavirus outbreak, including Korea and Australia. Such measures can help to restore confidence and reduce debt-servicing costs," the OECD said in its report.

In February, the Bank of Korea left its key policy rate frozen at 1.25 percent.

entropy@yna.co.kr
(END)