South Korea faces economic crisis that was announced on Thursday as the GDP Plummets by 2.9 % in the second quarter. This event is considered to be the worst performance of the country since the 1997 economic drop.
During the first quarter, the South Korean economy started to face an economic crisis as the Gross Domestic Product dropped about 1.3%. The economy dropped further below by the second quarter.
The reason behind the GDP drop was stated by Park Yang-su, Head of BOK’s Economic Statistics Office in a press release,
“This was largely caused by a sharp drop in exports with the new coronavirus continuing to spread, unlike our expectation that it will likely slow down.”
He added that the exports fell sharply because of the economic lockdowns in major import countries as one of the security measures due to the pandemic.
The second quarters’ result was unexpected since in May the BOK expected to have about only 1.8% GDP decline in the worst-case scenario.
“(The latest result) 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,” said Park.
In the past few weeks, reports had flooded that countries including Japan and Singapore are experiencing crisis mainly because of the COVID-19 pandemic. So far, China was the only country to have recovered from the economic recession.
South Korea Faces Economic Crisis: Can They Recover?
Park mentioned during the press release that it is unlikely to have immediate recovery from the economic crisis.
“The recovery in our exports may further be delayed, in which case our economic growth cannot but also be affected.”
The recovery will depend on the COVID -19 pandemic situation and on the degree of economic lockdown with the importing countries.
“The country’s annual economic growth will be determined by whether other countries will not strengthen their lockdown even if the COVID-19 pandemic does not slow, and by their efforts to boost economic growth,” BOK officials stated.
In contrary to Park, South Korea Finance Prime Minister Hong Nam-ki believes that the economy will recover quickly just like what happened in China.
“The domestic market showed some recovery in the second quarter but the GDP growth turned out lower than expected mostly because of external factors…Should the current situations prolong; the economy is likely to rebound significantly in the third quarter.” Hong said.
Hong added in his statement,
“It’s 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.”
South Korea Faces Economic Crisis: What Do the Economists Say?
Oh Suk-tae, a senior economist at Societe Generale in Seoul mentioned in a statement,
“I am sure that the Korean economy will recover in the second half of this year. The point is how strong it will be.”
Oh Suk-tae added, “There is a debate over whether it will be a U-shaped or V-shaped recovery, and I think it depends on how quickly vaccines will be developed and how long we could sustain until then.”
On the other hand, Moon Jung-hui, an economist at KB Bank had an opposite opinion about the topic. Jung-hui stated that the South Korean economy is likely to contract by the next quarter.
“The economy is likely to contract for at least another quarter as hard times will continue for exports.”
Jung-hui added, “Consumption will improve especially on increased fiscal expenditure, but exports of key items including petrochemical products will suffer.”
Economic experts as well as South Korean leaders have different views regarding the economic crisis. However, all parties seek positive results in the future.
Jeffry Jeve , News Fior Author, is a dedicated Freelance Writer and a Blogger who stays organized as much as possible. He became a writer in Modern Writers PH and a Managing-Editor-in-Chief in a school publication named “The Lightseekers”.