The Organisation for Economic Co-operation and Development (OECD) has predicted that Korea’s gross domestic product (GDP) will grow by nearly four percent next year. This figure is higher than both the average OECD growth rate of 2.3 percent and the average world rate of 3.6 percent.
The OECD predicted in its OECD Economic Outlook, published on November 19, that Korea’s growth is, “projected to pick up to around 4 percent in 2014-15,” due to stronger growth, despite a high level of household debt.
It expects Korea’s GDP growth rate to be around four percent over the next two years thanks to an improved export environment and an expanded volume of trade. The OECD said that the continuing influx of capital and the rise in stock prices both boost consumer sentiment and corporate sentiment, unlike in other emerging economies.
The report said that this rate of GDP growth will be helped by continued fiscal spending, with more money in the national budget, and by the central bank’s low interest rate policy. It also positively valued the government’s efforts to solve the household debt problem by raising public funds.
The OECD predicted that Korea’s inflation rate will remain stable at 1.2 percent this year and rise to 2.1 percent in 2014. The report said Korea’s inflation rate will be, “around 1.25 percent [which is] toward the midpoint of the central bank’s target range of 2.5 to 3.5 percent,” thanks to, “stronger growth, led by a rebound in exports and business investment.”
Although the Korean economy will gradually recover next year and afterward, the report said that the country will be affected by the overall condition of the world economy.
It said that the Korean economy is subject to the conditions of the world economy and to changes in world exchange rates as more than a half of its GDP comes from exports.
The report also raised the possibility that the high level of household debt and a weak property market could limit private spending. However, the OECD added that the Korean government’s actions to solve household debt problems and revitalize the housing market could make the situation better than expected.
The OECD advised the Korean government to use both monetary and fiscal stimulus and to conduct structural reforms in order to respond to downside risks and to support sustainable growth.