NUSADAILY.COM-SEOUL – South Korea experienced a recession in the second quarter of this year. This condition is the country’s worst economic setback since more than two decades. The trigger for the recession is that export numbers have fallen sharply due to the crisis of the COVID 19 era pandemic.
Bank of Korea, on Thursday 23 July 2020, said the country’s economy shrank with a seasonally adjusted 3.3% in June compared to the previous three months. This figure is the sharpest contraction since the first quarter of 1998.
South Korea is the fourth largest economy in Asia. Following Japan, Thailand and Singapore, which had already experienced a technical recession – an economic downturn for two consecutive quarters.
Even so, analysts and South Korean policy makers said it was working to make economic recovery possible. He is optimistic that the recovery will be faster than other countries in the region.
“It’s possible for us to rebound like China in the third quarter. While the pandemic is slowing and production activities abroad, schools and hospitals are returning, “said South Korean Finance Minister Hong Nam-ki in response to recession data.
He referred to the Chinese economy which returned to growth in the second quarter after falling sharply during the first quarter.
South Korea’s gross domestic product (GDP) fell by 2.9% year-on-year (YoY). This is the biggest decline since the fourth quarter of 1998.
Export activity, which accounts for nearly 40% of the economy, is the sector that is the biggest draw to a slump in growth. Ie, with a decrease of 16.6% in one quarter – the worst since 1963.
South Korea’s Government Spends Rp3,374 trillion Stimulus
The government has poured an economic stimulus of around 277 trillion won (equivalent to Rp3,374 trillion) so far. However, policy makers are not enough to be able to control global demand for domestic exports.
“The worst part seems to be over. The base effect and fiscal financing of the additional budget will increase investment, “said Park Sung-hyun, an analyst with HI Investment & Securities.
For the whole of 2020, analysts expect the economy to fall an average of 0.4%. But the International Monetary Fund (IMF) projects a contraction of even more than 2.1%.
Last week, the governor of Bank of Korea called the revision larger than the 0.2% projection previously stated for the 2020 economic downturn as unavoidable. (ant / yos)