Seoul: The Organization for Economic Cooperation and Development (OECD) on Tuesday maintained its growth forecast for the South Korean economy at 1 percent this year, while projecting an improvement in 2026, according to Seoul's finance ministry.

According to Yonhap News Agency, the OECD report, released by the ministry, noted that the country's real gross domestic product (GDP) is expected to weaken to 1 percent in 2025 before rising to 2.1 percent both in 2026 and 2027. This projection remains unchanged from the OECD's previous outlook in September and aligns with the Bank of Korea's (BOK) latest forecast. The forecast is slightly more optimistic than the 0.9 percent growth projected by the South Korean government, the Korea Development Institute (KDI), and the International Monetary Fund (IMF).

The OECD attributed the relatively positive outlook to South Korea's fiscal stimulus measures, which included two rounds of supplementary budgets this year, totaling roughly 1 percent of the country's GDP. The organization mentioned that approximately half of the stimulus was provided in the form of consumption coupons, offering a direct, albeit temporary, boost to growth. While the extra budgets provided ample fiscal support for 2025, the OECD emphasized the need for a sustainable, long-term fiscal framework.

Labor market trends were also highlighted by the OECD, with increased participation by women and the elderly expected to expand employment and keep the unemployment rate low. The organization projected that headline consumer price inflation would remain close to the BOK's 2 percent target.

Exports are anticipated to support short-term growth despite higher tariffs but may slow in the medium term. The OECD warned that uncertainty over tariff negotiations and structural shifts in global supply chains could impact exports and reduce business investment. Regulatory reforms, such as lowering barriers to trade and foreign direct investment, along with opening heavily state-involved sectors to competition, could further enhance growth.

The OECD suggested that growth could exceed projections if households increase spending of rising income and public transfers more than currently assumed. Regarding monetary policy, the OECD indicated that further easing might be necessary due to weak domestic demand. However, it stressed that spending plans should be accompanied by a bipartisan commitment to achieving sustainable public finances.