OECD sharply lifts Korea’s 2026 growth forecast to 3.7%

The Organisation for Economic Co-operation and Development (OECD) on Wednesday raised its forecast for Korea’s 2026 economic growth to 3.7 percent, marking the largest upward revision among G20 economies.

The OECD lifted its forecast by 1.1 percentage points from the 2.6 percent it projected in June, when it also made the largest upward revision among the G20 economies. The latest upgrade puts Korea’s growth forecast above the world’s growth rate of 2.9 percent, which the OECD raised by 0.1 percentage point.

The OECD also lifted its forecast for Korea’s growth next year from 1.9 percent to 2.6 percent. It expects continued strength in exports and industrial production of Asia’s fourth-largest economy, driven by soaring demand for AI chips, while household spending continues its gradual recovery through 2027.

The forecast is below the global growth rate of 3 percent, even after the OECD cut its projection by 0.1 percentage point. The OECD said large oil inventories and government support measures have helped soften much of the economic impact of the Middle East war, while many economies have shown resilience in the face of external shocks. The spread of AI has also supported global investment, production and trade. But the organization acknowledged concerns over the profitability of AI-related companies and their reliance on high leverage and the need for close monitoring.

The organization expects Korea’s inflation to rise 3 percent this year, up 0.4 percentage point from its previous forecast and above the Bank of Korea’s 2 percent target. It raised its inflation forecast for next year by a larger 0.5 percentage point to 2.7 percent.

The higher inflation outlook comes as the government rolls out expansionary fiscal policy, as the total government expenditure for 2027 is set at 821 trillion won ($604 billion), up 12.8 percent year-over-year and the highest on record.

“The upward revision to the inflation forecast appears to have been driven mainly by the sharp upgrade to the growth outlook and higher international energy-price projections compared to June,” the Ministry of Finance and Economy said in a statement.

BY JIN MIN-JI [[email protected]]