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Shipping containers awaiting export at the Port of Busan. (Yonhap News)

South Korean economic experts predicted an economic growth rate of –0.9% for the country this year. This is a decrease from a previous projection during the first half of the year, coming amid the continuation of the global novel coronavirus pandemic.

On Aug. 9, the Korea Development Institute (KDI) published findings from a July survey of 20 South Korean experts in the August edition of its “Monthly Economic Trends.” The results showed the respondents predicting an average growth rate of -0.9% for the year. The rate, which is 0.6 percentage points lower than the -0.3% rate predicted in a survey last April, reflects a mood of growing pessimism about the domestic economy as a whole. The average projection for next year’s economic growth rate was 2.8%, 0.8 percentage points higher than the 2% recorded in the April survey.

The experts predicted a decline of 9.5% in exports from last year amid a sustained slump this year due to stagnation in the global economy. In contrast, they projected a rise of 5.9% for next year.

KDI's surveys of experts on S. Korea's economic prospects

As the domestic real economy contracts, they predicted an unemployment rate of 4.2% for the year -- up by 0.4 percentage points from last year’s 3.8% -- and an increase of 140,000 in unemployed persons compared with last year. The rate of increase in consumer prices was expected to remain at a low level in the second half of the year, for an annual level of 0.4%.

“Most respondents predicted that the benchmark interest rate (0.5%) will remain at its current level through next year,” the KDI reported.

The South Korean government is officially predicting a growth rate of 0.1% for the year and anticipating the possibility of an economic resurgence during the second half. But most think tanks in South Korea and overseas are predicting that negative growth in the range of -1% will be unavoidable.

At the same time, the KDI concluded in the August issue of “Monthly Economic Trends” that “the economic slump has been mitigated to some extent as the COVID-19 pandemic’s economic impact on South Korea has softened up recently.” One major factor is the gradual recovery of domestic consumption as community infections have diminished. Retail sales for June were up by 6.3% from the year before amid a boom in automobile sales, surpassing the 1.7% rate of increase observed in May. Facility investment rose by 13.9% the same month amid an increase in global semiconductor demand -- far exceeding the 3.4% rate of increase the month before.

June production was up by 0.7% from the year before amid a slight relief in production slumps for the mining/manufacturing and service industries. With the lifting of lockdown measures in major economies, the rate of decline in exports stood at 7% for July, an improvement from 10.9% the month before.

But the easing of the economic slump was also attributed in part to temporary factors, including a reduction in the individual consumption tax for vehicles, payments of emergency disaster relief benefits, and an increase in the number of operation days.

“This is a reflection of anticipation of future economic recovery, and some of the consumption indicators in major economies have been rebounding as domestic and overseas economic confidence has been restored,” KDI noted.

At the same time, it warned of the “possibility that the rising number of COVID-19 diagnoses around the world and the intensifying conflict between the US and China could function as constraints on economic recovery.”

By Lee Kyung-mi, staff reporter

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