South Korea has joined the likes of the US, Japan, Thailand, Singapore, Germany, and other economies officially in recession as a result of the impact of COVID-19.
The country’s economy contracted for a second consecutive quarter, a report from the Bank of Korea on Thursday revealed.
Gross domestic product shrank by 3.3% for three months to June from the prior quarter when it contracted 1.3%.
It was South Korea’s worst performance since the first quarter of 1998 at the height of Asia’s financial crisis as exports fell the steepest since 1963.
Exports, which account for nearly 40% of the economy slumped 16.6% quarter-on-quarter the worst since 1963 on weak demand for cars and petrochemicals while business investment in construction and factories swung shrank.
Construction investment fell 1.3% quarter-on-quarter, while capital investment dropped a nasty 2.9%.
The output from manufacturing and the service sector fell by 9.0%, and 1.1%, respectively.
Economists say there was a 1.4% rise in private consumption in the June quarter, from March thanks from three months earlier, thanks to government support packages for business and labour.
Reuters says the South Korean government has committed itself to spending 277 trillion won ($US231 billion) worth of stimulus to fight the impact on the economy and society from the pandemic so far.
But as with Japan, China, Singapore, and Thailand, the real issue going forward will be the strength of demand for manufactured goods and services – and that’s in the hands of an unstable US administration, arguing Europe and aggressive China.
In the year to June, the economy contracted 2.9% following a 1.4% growth in the previous quarter.
The central bank expects Korea’s economy to undershoot its earlier forecast of a 0.2% contraction for this year.
The International Monetary Fund estimates a 2.1% contraction for the year which signs a rebound in the next two quarters.
