As the pandemic continues to batter the global economy, South Korea has recently recorded its worst GDP growth since the Asian financial crisis.
For the export-reliant country of South Korea, the global economic inactivity brought by the pandemic has become its worst nightmare. The fourth-largest economy in Asia has yet again seen a decline in its gross domestic product (GDP) following its first-quarter drop of 1.4%.
South Korea’s Q2 GDP shrinks by 2.9%
As per the Bank of Korea’s latest economic outlook, the country’s GDP contracted by 2.9% in the second quarter from last year’s GDP in the same period. The drop, according to the central bank, is also the worst and slowest growth South Korea has seen in more than two decades.
For the local economy quarter-to-quarter comparison, South Korea’s economy plummeted by 3.3%, also the lowest compared to 6.8% on quarter growth during the 1988 Asian financial crisis.
On the other hand, Park Yang-su, economic statistics director at BOK, assured that the April to June’s drop would not equally affect the country’s annual growth rate. South Korea’s economic growth, as he told, will massively depend on other countries’ lockdown restrictions and economic productivity.
“There is the possibility that key countries will not enhance their lockdown policies even under a secondary outbreak, in fear of economic recession,” Park said, as quoted by the Korean Herald.
The research firm IHS Markit recently released its global economic outlook, suggesting that the global economy will most likely take a W-shaped recovery or cycle as consumer sentiment in core economies remain weak.
Low exports prompted GDP decline
The economic statistics director also explained that South Korea’s economy downward trend was due to a massive decline in exports.
“[The downturn] was largely due to the sharp drop in exports amid the persisting COVID-19 spread, which contradicted our expectation that such downtrend will slow down,” he said.
Export trading accounts for about 40% of the country’s economy. And as per the latest data of BOK, exports slipped by about 13.6% year-on-year in the second quarter and higher compared to last year’s 5.6%.
S. Korea may see China-style rebound, Nam-ki says
Meanwhile, Finance Minister Hong Nam-ki is optimistic that South Korea’s economy would bounce back in the third quarter. He even predicted a “china-style recovery,” citing economic activity resumptions in other countries.
“It is possible for us to see China-style rebound in the third quarter as the pandemic slows and activity in overseas production, schools, and hospitals resume,” Hong said.
The Finance Minister is also showed confidence in South Korea’s fiscal efforts saying the “worst may now be over.”
“The domestic market showed some recovery in the second quarter, but the GDP growth turned out lower than expected mostly because of external factors,” he continued.