The Organization for Economic Cooperation and Development said on July 2 that it maintained its forecast for South Korea’s economic growth at 2.6% in 2026, citing resilient consumer spending, fiscal support and continued strength in semiconductor exports despite domestic political turmoil and conflict in the Middle East.
In its 2026 Korea Economic Survey, the OECD left its forecast for gross domestic product growth unchanged at 2.6% for this year and 1.9% for 2027.
The organization said private consumption, government spending and robust semiconductor exports are expected to remain the main drivers of growth. Consumer sentiment, which weakened after the declaration of martial law earlier this year, has recovered with the help of expansionary fiscal policy, while government-issued consumption vouchers supported household spending and small businesses.
The OECD said the economic fallout from the conflict in the Middle East has been limited because of swift policy responses. It cautioned, however, that measures such as fuel price caps and temporary fuel-tax cuts carry fiscal costs while also benefiting higher-income households.
Jon Pareliussen, the OECD’s Korea desk economist, dismissed concerns that the semiconductor supercycle is nearing its end.
“It is too early to say,” he said, adding that South Korea remains well positioned for sustained economic growth.
Private consumption is projected to rise 2.2% in 2026 and 2.1% in 2027, while government consumption is expected to increase 2.9% and 2.1%, respectively.
Private investment is likely to remain soft in the near term because of geopolitical uncertainty before recovering later this year. Gross fixed capital formation, which includes business equipment and construction investment, is forecast to increase 2.1% this year and 2.2% next year.
Exports are expected to grow 6.0% in 2026 before slowing to 1.9% in 2027 as the contribution from semiconductor shipments moderates. Imports are projected to rise 4.4% this year and 2.1% next year.
The unemployment rate is forecast to edge down to 2.8% this year and 2.7% next year. Consumer-price inflation is expected to average 2.6% in 2026 and ease to 2.2% in 2027.
The OECD said higher energy prices are likely to keep inflation elevated in the near term, but underlying demand-driven inflation remains contained. It said monetary policy should focus on keeping longer-term inflation expectations anchored rather than responding to temporary energy-price shocks.
The report said the Bank of Korea should consider raising its benchmark interest rate by 25 basis points, or 0.25 percentage point, in the near term.
South Korea’s current-account surplus is projected at 12.3% of gross domestic product this year before narrowing to 9.9% next year.
The OECD also raised its estimate for the country’s general government debt to 51.4% of GDP in 2026 and 52.3% in 2027 after revising historical data to reflect corrected financial-asset figures.
Looking beyond the near-term outlook, the OECD urged South Korea to strengthen fiscal discipline to address the long-term impact of rapid population aging. It said any tax-revenue windfalls should be directed toward growth-enhancing investment, workforce training, debt reduction or long-term investment funds.
The organization also called for broader trade diversification to reduce South Korea’s dependence on exports to the U.S. and China and said productivity gains from the semiconductor industry should spread more broadly across the economy to narrow widening productivity and income gaps.
