[Anchor]

Joining us for Friday's Economic Insight is reporter Han Jiyeon. Han, the OECD has released its economic growth forecast for South Korea.

[Reporter]

The OECD has maintained its economic growth projection for South Korea this year at 2.6%, the same figure as last month.

Compared to other institutions that have recently raised their forecasts to the 3% to 4% range, this can be considered a relatively conservative outlook.

Looking at the recent state of our economy, some domestic and international institutions have been consecutively raising their growth forecasts, bolstered by a strong semiconductor market and the effects of supplementary budgets.

While the OECD kept its projection unchanged, the report uses the term "recovery" multiple times throughout, positively assessing the recovery trend of our economy.

In particular, it analyzed that consumer sentiment, which had contracted following the martial law situation, has rebounded due to expansionary fiscal policies and the distribution of consumption coupons, contributing to the recovery of consumption and small business owners.

The OECD expects semiconductor exports to lead South Korea's economic growth this year, and its outlook for the sector was relatively positive.

While there are mixed opinions in the market regarding how long the AI investment boom will last, the OECD assessed that it is still too early to conclude that the semiconductor super-cycle will end soon.

However, it projected that the growth rate will slow to 1.9% next year as the export growth trend moderates compared to this year.

Although inflation has recorded the 3% range for two consecutive months recently, it is expected to reach 2.6% on an annual basis this year.

Nevertheless, as inflationary pressure may persist for the time being due to rising energy prices, the OECD recommended that the Bank of Korea consider raising the base interest rate by 0.25 percentage points.

[Anchor]

Looking at the details, it is notable that they recommended increasing property ownership taxes while reducing transaction taxes, such as acquisition and capital gains taxes.

[Reporter]

That is correct. The OECD recommended that for our economy to grow more efficiently in the future, we need to overhaul the tax structure, including property taxes, as you mentioned.

The most notable part is the property tax system.

The OECD diagnosed that South Korea has a structure where the proportion of transaction taxes, paid when buying or selling a home, is higher than that of ownership taxes.

In contrast, the proportion of ownership taxes stands at 29.4%, which is only about half of the OECD average of 56%.

Therefore, it recommended adjusting the tax system in a direction that reduces transaction taxes and increases the proportion of ownership taxes.

The reasoning is that when the burden of transaction taxes is high, it becomes difficult for people to buy and sell homes easily, even when they change jobs or living conditions.

This ultimately leads to reduced mobility and can dampen economic activity.

However, it added that even if ownership taxes are expanded, they should be designed cautiously, taking into account the unique characteristics of the Korean housing market.

The organization also recommended reforms to the inheritance tax system.

It suggested considering an inheritance acquisition tax system, which taxes the actual assets received by the heir, rather than the current method of taxing the entire estate of the deceased.

There is also content that smokers might find relevant.

The OECD noted that South Korea's tobacco taxes and prices are low compared to other OECD countries and recommended an increase in tobacco taxes.

[Anchor]

Lastly, they also analyzed the government's inflation countermeasures.

[Reporter]

The OECD recommended long-term adjustments to the government's fuel price stabilization measures, such as the price ceiling system and fuel tax cuts.

The OECD explained that such policies could burden government finances and affect the role of market prices.

It also noted that since fuel tax cuts benefit both vulnerable groups and high-income earners, resources might not be directed where they are most needed.

Therefore, the OECD recommended that if energy price instability continues, the government should phase out the oil price ceiling and fuel tax cuts, and instead shift support to focus on vulnerable groups.

The OECD also identified aging as a key challenge for the Korean economy.

Stating that pension reform must continue to prepare for an aging society, it proposed raising the pension eligibility age to 68 by 2035, and subsequently adjusting both the eligibility age and the contribution age limit in line with life expectancy.

It analyzed that if such pension reforms are implemented, South Korea's GDP in 2060 could be 1.9% higher than it would be otherwise.