SEJONG, Aug. 11 (Korea Bizwire) — South Korea’s economy is likely to shrink less than expected this year thanks to its successful response to the coronavirus pandemic, the Organization for Economic Cooperation and Development (OECD) said Tuesday.
In its latest report on South Korea, the Paris-based club of major economies predicted Asia’s fourth-largest economy will contract 0.8 percent in 2020 from a year earlier.
The updated prediction marks an upgrade from its June forecast of 1.2 percent contraction and the highest growth estimate among 37 OECD member countries.
It is also far better than the OECD average of minus 7.5 percent contraction. The second-best performer is Turkey, whose economy is projected to shrivel 4.8 percent.
Comparable figures are shrinkage of 6 percent for Japan, 6.6 percent for Germany, 7.3 percent for the United States and 11.5 percent for Britain.
Yet the latest OECD forecast for South Korea is bleaker than a prediction of 0.2 percent contraction by the Bank of Korea (BOK).
The OECD revised its full-year growth forecasts for its member countries on the basis of their second-quarter performances.
In the April-June period, South Korea’s economy shrank 3.3 percent from three months earlier as the pandemic hurt its exports and consumer spending.
The reading was dwarfed by China’s 11.5 percent expansion but was less bad than contractions of 9.5 percent for the U.S., 10.1 percent for Germany, 13.8 percent for France, 12.4 percent for Italy and 18.5 percent for Spain.
The OECD published revised reports on four economies — South Korea, the U.S., Slovenia and Greece — and Seoul is the sole member to enjoy an upgrade.
The OECD projected South Korea’s private consumption and investment to perform better than bargained for this year.
South Korea’s private consumption is expected to drop 3.6 percent on-year in 2020, compared with an earlier estimate of a 4.1 percent fall. Total investment is predicted to expand 2.9 percent, a turnaround from an earlier forecast of 0.7 percent decline.
Exports, however, are projected to sink 5.7 percent this year, a downgrade from its June estimate of 2.6 percent contraction.
The OECD attributed its upgrade to Seoul’s proper and quick response to the COVID-19 outbreak, which has led to far less of a drop in growth and employment than other member nations.
The organization also gave good marks to South Korea’s expansionary fiscal policy and measures to stabilize the financial market.
Yet the OECD said South Korea needs to maintain a soft monetary policy to shore up the economy and keep close tabs on the hot property market.
In late May, the central bank slashed its policy rate by a quarter percentage point to a record low of 0.50 percent in a bid to help cushion the economic impact of the COVID-19 pandemic.
The novel coronavirus has infected 14,660 South Koreans since its first case confirmed on Jan. 20, with the country’s death toll reaching 305.