The Organization for Economic Cooperation and Development (OECD) on Tuesday forecast a sharper-than-expected contraction for the South Korean economy this year, citing the fallout of the new coronavirus outbreak.

The OECD expected Asia's fourth-largest economy to retreat 1.1 percent this year, steeper than its September forecast of a 1 percent contraction. The Paris-based club of major economies predicted the Korean economy to grow 2.8 percent next year and 3.4 percent in 2022.

Despite the downward revision, the OECD said the South Korean economy is expected to contract by the smallest margin this year among its 37 member countries, citing the country's efforts to curb the spread of the new coronavirus.

"(South Korea's) effective measures to contain the spread of COVID-19 have limited the estimated fall in gross domestic product to just over 1 percent in 2020, the smallest decline in the OECD," the organization said.

The OECD said "activity is picking up on the back of a rebound in consumption, bolstered by large government transfers to households, and a recovery in exports, led by semiconductors."

The OECD's growth forecast is on a par with the Bank of Korea (BOK)'s projection.

Last week, the BOK, South Korea's central bank, revised up its 2020 growth look for the Korean economy to a 1.1 percent contraction from its earlier estimate of a 1.3 percent retreat.

The South Korean economy grew at a faster-than-expected pace of 2.1 percent in the July-September period from three months earlier on improving exports. Asia's fourth-largest economy contracted for the second straight quarter in the second quarter amid the COVID-19 pandemic.

The OECD said South Korea is one of five OECD countries that will likely see their economic growth to return to the pre-pandemic level next year.

But it also added the recovery of the Korean economy remains "vulnerable" to further spread of the virus at home and abroad until an effective vaccine is developed in the second half of next year.

"Policies need to continue supporting households and businesses until the economy is on a firmer recovery path," the organization noted.

The OECD revised up its 2020 outlook for the global economy to a 4.2 percent contraction from its September estimate of a 4.5 percent retreat. Next year, the global economy is forecast to grow 4.2 percent. (Yonhap)