Seoul: The Organization for Economic Cooperation and Development (OECD) has revised its forecast for South Korea's economic growth in 2025, reducing it by 0.5 percentage points to 1 percent. The downgrade is attributed to growing uncertainties both domestically and internationally, as reported by the finance ministry.

According to Yonhap News Agency, this revision marks the second adjustment within six months. The OECD had previously lowered its growth forecast for Asia's fourth-largest economy to 1.5 percent in March, down from a 2.1 percent estimate made late last year. For 2026, the OECD has maintained its growth forecast of 2.2 percent for South Korea.

The OECD's revision for South Korea is the second-largest reduction among major economies, following the United States, whose growth outlook for 2025 was cut from 2.2 percent to 1.6 percent. Japan's projection was also decreased by 0.4 percentage points to 0.7 percent. These updated forecasts are in line with recent projections from the South Korean government and other international organizations.

Last month, the Bank of Korea adjusted its 2025 growth outlook to 0.8 percent from 1.5 percent, while the International Monetary Fund (IMF) halved its forecast for South Korea's economic growth to 1 percent in April. The OECD noted that South Korea's economy has been impacted by the economic repercussions of the temporary imposition of martial law in December, which adversely affected the gross domestic product (GDP) in the first quarter. External factors, such as uncertainties over U.S. trade and tariff policies and global trade tensions, are also expected to influence South Korea's exports and investment.

While fiscal stimulus measures are anticipated to provide short-term relief, the OECD has cautioned that the South Korean government needs to implement a sustainable fiscal framework to improve financial health over the long term. Earlier this month, the National Assembly approved a supplementary budget of 13.8 trillion won (US$10 billion).

Further fiscal expansion is expected as both leading presidential candidates, Lee Jae-myung of the Democratic Party and Kim Moon-soo of the People Power Party, have proposed expansionary fiscal policies.