Value context and insight. lkm@koreatimes.co.kr
'Economic outlook 1Q could hit 11-year low'
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By Lee Kyung-min
By Lee Kyung-min
The Korean economy is expected to contract 1.5 percent in the first quarter from three months earlier, a survey of international and local research institutes and investment banks showed Sunday.
The notably grimmer forecast from an expected 0.2 percent contraction two months earlier by the same pool of organizations is fueling concerns that Asia's fourth-largest economy could be set for a worse-than-feared contraction in the months to come, given the economic fallout of the virus began to take a more pronounced toll in late March.
The International Monetary Fund (IMF) forecast April 14 that the Korean economy would shrink 1.2 percent in 2020 amid impending concerns that the world could experience the worst recession since the Great Depression in the 1930s. The figure was revised down 3.4 percentage points from a 2.2 percent expansion in January.
A Bloomberg survey of nine economic and research agencies and investment banks reported an expected average contraction of 1.5 percent in the first quarter of 2020.
The forecast would be the worst figure since April 2008, when the economy shrank 3.3 percent amid the economic fallout of the global financial crisis.
Korea should brace for a harder-than-expected hit, given China reported a year-on-year 6.8 percent contraction in the first three months of 2020, the first contraction of what has been considered the world's growth engine since 1992 when the country began releasing related data.
“The Chinese figure was a shock,” Seoul National University economist Kim So-young said.
“We knew it was coming but it was a shock nonetheless. The virus hit every sector of the industry, squeezing exports, not to mention demand for private consumption crushed amid lockdowns. Specifics will be made clearer when the Bank of Korea releases advance figures Thursday, but it is worrisome.”
Of more concern is figures of the second quarter and thereafter, given Korea's major trading partners have yet to bring the virus under control.
“Reduced Korean exports to the U.S. and European countries are not fully translated into figures in the January-March period. But it will be in those in the following quarter,” he said.