The Korean economy is recovering from the global inflation shock, with gross domestic product (GDP) growth supported by strong exports. In order to boost resilience and growth, Korea needs to strengthen its public finances, enhance competition, raise its low birth rates and address the consequences of population ageing. A further priority should be reducing greenhouse gas emissions from industry and electricity production.

The latest OECD Economic Survey of Korea projects the country’s GDP growth at 2.6% in 2024 and 2.2% in 2025, up from 1.4% in 2023. Korea’s growth is driven by strong export prospects with renewed demand for computer chips amid surging investment in artificial intelligence. The Survey highlights that Korea needs to diversify its trade and value chains to mitigate the risks associated with geopolitical tensions and disruptions in foreign inputs and markets. Inflation is projected to decline from 3.6% in 2023 and 2.5% in 2024 towards the central bank’s target of 2%, allowing for monetary policy easing later this year.

Raising the world’s lowest fertility rate, which fell to 0.7 children per woman in 2023, has become a priority for the Korean government. Improving work-life balance and reducing gender gaps are key to boost fertility and female employment, a dual necessity in addressing workforce decline and low birth rates. Korea should support working parents by adjusting the childcare system to their needs, expanding parental leave to the entire workforce, and strengthening sanctions for workplace discrimination and the capacity of the labour inspectorate to follow up. Reducing education costs and labour market dualism while alleviating the burden of high housing costs would also encourage young people to form families.

Korea needs to introduce policies that counteract the negative labour market consequences of rapid population ageing. Older people should be encouraged to continue working by phasing out the seniority-based wage system and company-specific mandatory retirement ages, raising the statutory retirement age, and providing upskilling and reskilling opportunities. Facilitating immigration would help attract more high-skilled workers and better integrate low-skilled foreign workers.

Korea should also boost productivity, especially in small and medium-sized enterprises (SMEs). While Korea’s share of SMEs in employment is the highest in the OECD, SME productivity is only about one-third of that of large companies, despite high government spending on SME subsidies. Reforms are needed to consolidate more than 1 600 SME support programmes into fewer, more co-ordinated and better targeted ones and to remove regulatory barriers to fair competition.

Korea’s economy is one of the most energy-intensive in the OECD, and managing the climate transition will be important. Although approximately three-quarters of the country’s greenhouse gas emissions are capped by the emissions trading scheme, emissions limits need to be tightened considerably to reach the country’s target of a 40% reduction by 2030 relative to the 2018 levels. Improving energy efficiency and implementing market-friendly regulatory reforms in the electricity sector should be prioritised as well.

See an Overview of the Economic Survey of Korea with key findings and charts.

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