OECD Says Highest Price System Should Be Phased Out; Pension Eligibility Age Should Be Raised

[Financial News] The Organisation for Economic Co-operation and Development (OECD) has recommended that the price cap system and fuel tax cuts currently in place to stabilize prices should be phased out. It also said pension eligibility ages should be raised and the dual structure of the labor market should be improved to strengthen fiscal soundness.
On the 2nd, the OECD released the 2026 Korea Economic Report, which included these recommendations. The report consists of four chapters: macroeconomic policy for the future, tax reform for growth and revenue, smarter education and lifelong learning, and reshaping the geography of opportunity.
The OECD said South Korea's economy is continuing a modest recovery, supported by a rebound in semiconductor exports and the government's expansionary fiscal policy, despite external uncertainties such as martial law and the Middle East war. It forecast South Korea's economic growth at 2.6% this year and 1.9% next year. Consumer price inflation is projected at 2.6% this year and 2.2% next year.
In the report, the OECD first recommended a gradual abolition of the price cap system and fuel tax cuts. It said the measures entail fiscal costs, can distort incentives, and also benefit high-income households. If the energy crisis persists, it added, policy should shift toward targeted support for vulnerable households and viable companies.
For fiscal soundness, the OECD said pension eligibility ages need to be adjusted. It proposed gradually raising the pension eligibility age by 2035 in line with the contribution age, and then linking both the eligibility and contribution ages to life expectancy. It also stressed the need for broad political agreement on a stronger fiscal framework, including medium-term fiscal targets consistent with long-term sustainability and spending restructuring.
On the real estate market, the OECD said tighter lending regulations such as the Loan-to-Value ratio (LTV) have helped curb housing prices and household debt. However, it added that if market pressure eases in the future, the rules should be reviewed again under a repayment-capacity-based system.
In education, it called for stronger lifelong learning systems. It noted that adult participation in education and training remains low compared with other OECD countries. It also pointed out that the labor market's dual structure and the practice of early retirement, driven by seniority-based wage systems, are weakening companies' incentives to provide training for current employees. It therefore suggested coordinating support systems by region and industry to promote lifelong learning.
For balanced regional growth, it proposed concentrated investment in key regional hubs, stronger local universities, greater fiscal autonomy for local governments, and simpler land-use planning systems.
The government said it will carefully review the OECD's policy recommendations and use them as a reference for future policy implementation.
hippo@fnnews.com Kim Chan-mi Reporter