Korea’s GDP to expand 2.1% in 2026 from 1% this year: OECD

South Korea’s economic growth is set to improve in 2026 and 2027 led by the government’s fiscal easing policies and a rise in real wages, according to a report on Tuesday.

In its global economic outlook report, the Organisation for Economic Co-operation and Development (OECD) projected Korea’s gross domestic product (GDP) growth rate to slow from 2 percent in 2024 to 1 percent this year. The rate, however, is expected to rebound to 2.1 percent in 2026 and 2027.

The OECD projected that Korea’s fiscal and monetary easing policies, along with increases in real wages, will support private consumption.

It noted that exports are currently underpinning Korea’s growth, but are expected to weaken in the medium term.

In particular, it warned that uncertainty surrounding tariff negotiations and structural changes in global supply chains could weigh on exports and dampen corporate investment.

The OECD, in the meantime, projected global GDP growth of 3.2 percent this year and 2.9 percent next year.

It said “Front-loading of goods production and trade ahead of the introduction of higher tariff rates” helped support growth in the first half, but noted this resilience faded in the second half.

It said high tariffs on imports to the U.S. and China will feed into business costs and consumer prices, which is expected to restrain investment and trade expansion.

The OECD added that persistent geopolitical and policy uncertainty is likely to curb domestic demand in several major economies.

It said financial conditions improved this year on the back of artificial intelligence investment and strong equity markets, but warned that elevated asset valuations increase the risk of future repricing.

It expects the global growth rate to recover to 3.1 percent in 2027 as the effects of tariff hikes gradually ease and governments deploy policies to support activity.

For the U.S., the OECD expects growth to slow from 2 percent this year to 1.7 percent next year, citing “continued cooling in employment growth, the sharp slowdown in net immigration, [and] the pass-through of tariff increases to the price level.” It forecasts a recovery to 1.9 percent in 2027.

The eurozone is projected to see growth rise from 1.2 percent in 2026 to 1.4 percent in 2027 as domestic demand strengthens and trade picks up.

The OECD urged European governments considering higher defense spending financed by debt to pursue “prudent fiscal policy” to maintain medium-term fiscal health.

China’s growth is expected to hold at 5 percent this year before slowing to 4.4 percent next year and 4.3 percent in 2027.

The annual inflation rate for G20 countries is expected to ease from 3.4 percent this year to 2.8 percent next year and 2.5 percent in 2027. The OECD expects inflation in most major economies to return to target by mid-2027.

The organisation warned that broader or sudden shifts in trade barriers, including higher tariffs on more categories of goods and tighter controls on exports of key resources such as rare earths, could weaken global growth, increase policy uncertainty and disrupt global supply chains.