OECD Lifts South Korea 2026 Growth Forecast to 2.6 Percent but Warns of Semiconductor Risks

The Organization for Economic Cooperation and Development raised its forecast for South Korea's 2026 economic growth to 2.6 percent from 1.7 percent in its report released July 2. The Paris-based group attributed the revision to accelerating export and investment growth driven by semiconductors.

South Korea's monthly exports exceeded $100 billion for the first time in June, with semiconductor shipments reaching $44.82 billion, nearly tripling from the prior period.

Douglas Sutherland, head of division at the OECD Economics Department, said the performance helped shield the economy from effects of the Middle East conflict. The report cautioned that greater dependence on semiconductor exports creates volatility in output and tax revenues along with strategic vulnerabilities.

Sutherland recommended monitoring the chip cycle and exercising caution with ongoing revenue, while Jon Pareliussen, head of the Korean Desk at the OECD, said it remains too early to conclude the cycle has ended.

Sutherland said excess revenue should support growth, reduce debt, or fund education and skills training. The OECD advised using fiscal policy to bolster domestic demand while pursuing medium-term consolidation. The report noted South Korea's total fertility rate stood at 0.93 in April, though the number of newborns has risen since July 2024.

It recommended raising the pension eligibility age beyond 63 by 2035, relaxing employment protection for regular workers, and expanding social insurance coverage. The OECD also called for shifting property tax revenue toward recurrent taxes and reviewing personal income tax exemptions, where more than one-third of wage earners currently pay nothing.