OECD Warns of Fragile Global Economic Recovery, Revises Down Outlook for South Korea

The Organisation for Economic Co-operation and Development (OECD) has revised down its growth outlook for South Korea in 2023 to 1.6 percent, as the global economic recovery remains fragile. The OECD also lowered its 2023 global growth forecast to 2.6 percent, up from 2.2 percent in its November projection, and 2.9 percent for 2024, up by 0.2 percent points compared to its previous forecast.

The biggest gains are expected to be seen in China, with 5.3 percent growth this year, and India, with 5 percent.[0] Despite the improved outlook, the OECD warned that the improvement was still fragile and risks are tilted to the downside.[1] Uncertainty surrounding the war in Ukraine and its broader consequences is a key concern.[2]

In the UK, the OECD expects GDP to fall by 0.2 percent this year, followed by a tepid 0.9 percent rebound in 2024.[3] This is a downgrade from its previous forecast of 0.4 percent decline in November.[4] UK's performance this year will compare with growth of 0.8 percent in the Eurozone and 1.5 percent in the US.[5]

The OECD noted that more positive signs have started to appear, with business and consumer sentiment improving, food and energy prices falling back and the full reopening of China.[6] It added that global growth is projected to remain at below-trend rates in 2023 and 2024, at 2.6 percent and 2.9 percent respectively, with policy tightening continuing to take effect.

Price pressures are more intense than previously expected, driven by rising costs in services, high profits in some sectors and tight labour markets. The OECD said that the Federal Reserve and European Central Bank must press ahead with interest-rate increases and not be blown off course by the fragility of the global economic recovery and vulnerabilities in the financial system.[7]

Warning that the worldwide economic growth rate will stay below average in 2023 and 2024, the outlook has more negative than positive risks. It is of utmost importance to note that price increases are more extreme than initially anticipated, due to an increase in service costs, high profits in certain industries, and a lack of workers. UK's Chancellor Jeremy Hunt said that the measures the government is taking to address the issues are going to be very important to improve the economic outlook for the country.[8]

0. “Blow for UK as experts predict economy will be the second-worst in G20” The Independent, 17 Mar. 2023, https://www.independent.co.uk/business/uk-economy-g20-oecd-russia-b2302997.html

1. “Australia's growth outlook still subdued: OECD” The Queenslander, 17 Mar. 2023, https://theqldr.com.au/politics/2023/03/18/economy-159

2. “OECD Falling Energy Prices Could Bolster Global Economic Growth” OilPrice.com, 17 Mar. 2023, https://oilprice.com/Energy/Oil-Prices/OECD-Falling-Energy-Prices-Could-Bolster-Global-Economic-Growth.html

3. “OECD says UK faces being only member of G7 in recession this year” Daily Mail, 17 Mar. 2023, https://www.dailymail.co.uk/news/article-11871867/OECD-says-UK-faces-member-G7-recession-year.html

4. “OECD lowers 2023 growth outlook for Korea to 1.6%” 코리아타임스, 17 Mar. 2023, https://www.koreatimes.co.kr/www/biz/2023/03/488_347319.html

5. “Can the UK economy outperform Russia?” The Spectator, 17 Mar. 2023, https://www.spectator.co.uk/article/can-the-uk-economy-outperform-russia

6. “Rapid hike in interest rates has led to ‘financial vulnerabilities', OECD warns” The Irish Times, 17 Mar. 2023, https://www.irishtimes.com/business/economy/2023/03/17/rapid-hike-in-interest-rates-has-led-to-financial-vulnerabilities-oecd-warns

7. “Central Banks Must Stay the Course on Rate Hikes, OECD Says” Financial Post, 17 Mar. 2023, https://financialpost.com/pmn/business-pmn/central-banks-must-stay-the-course-on-rate-hikes-oecd-says

8. “UK economy to be ‘worst performer in G7' in 2023, OECD says | NationalWorld” NationalWorld, 17 Mar. 2023, https://www.nationalworld.com/news/uk/uk-economy-g7russian-economy-g20-oecd-economic-outlook-4069275

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