The Organization of Economic Cooperation and Development (OECD) on Thursday revised down this year’s growth outlook for South Korea to 2.0 percent as soft global demand and ongoing trade tensions continue to weigh on the export-reliant economy.

The organization made the cut after holding its forecast steady at 2.1 percent in May and September. The outlook was unchanged for the global economy at 2.9 percent and for G-20 countries at 3.1 percent.

“Economic growth (in Korea) will remain subdued, as the global slowdown and trade tensions hold back exports, while high uncertainty weighs on investment,” the OECD said in the report.

Korea’s exports dropped 14.7 percent on year to $46.8 billion in October, extending their decline for the 11th straight month amid weak chip prices and global trade uncertainties.

The OECD expected the country’s monetary easing to continue as headline inflation will stay below the 2 percent inflation target.

The Bank of Korea last month cut the benchmark interest rate by a quarter percentage point to 1.25 percent, a record low level last seen in June 2016. Inflation at home has remained below 1 percent throughout the year, staying flat in October after two months in sub-zero territory.

“Although very low headline inflation is partly due to falls in food prices, core inflation is also well below the 2 percent inflation target,” the report said.

The OECD expected consumer prices to slump even further in the year-end to 0.3 percent from the previous 0.8 percent. Private consumption growth outlook was also slashed to 1.8 percent from 2.5 percent in September.

It expected Korea’s economic growth to pick up next year to 2.3 percent, helped by a gradual recovery in global chip demand and expansionary fiscal policy. But the outlook was still lower than the BOK estimate of 2.5-2.6 percent.

The government in August proposed a record 513.5 trillion-won ($423.7 billion) budget for 2020, up 9.3 percent from this year. The budget bill is still pending in parliament.

By Oh Chan-jong and Kim Hyo-jin

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