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Korean economy to shrink 2.3 pct this year on virus: report

All News 14:43 April 08, 2020

SEOUL, April 8 (Yonhap) -- The South Korean economy is expected to contract 2.3 percent on-year in 2020 due to the fallout from the new coronavirus outbreak, a local private think tank said Wednesday.

The latest projection by the Korea Economic Research Institute (KERI) is down from its earlier estimate of a 1.9 percent gain made in the fourth quarter of last year.

It would mark the South Korean economy's first contraction since the 5.1 percent decline recorded in 1998 in the wake of a foreign exchange crisis.

"Hit by the outbreak of COVID-19, it is inevitable for (South Korea) to suffer a severe economic slump," said KERI under the Federation of Korean Industries, the nation's big business lobby.

Korean economy to shrink 2.3 pct this year on virus: report - 1

The government's all-out efforts are not sufficient to reverse the trend of an economic downturn as the coronavirus outbreak has virtually paralyzed production and consumption here amid worsening external conditions, the think tank added.

KERI joins other institutions that have sharply downgraded their growth predictions for Asia's fourth-largest economy, blaming the coronavirus pandemic.

Nomura Securities of Japan recently revised its 2020 growth outlook for South Korea to minus 6.7 percent, and British think tank Capital Economics cut its prediction to minus 3 percent in a report published Friday.

Morgan Stanley has projected a growth rate of minus 1 percent; UBS minus 0.9 percent; Standard Chartered minus 0.6 percent; and global credit appraiser Fitch Ratings minus 0.2 percent.

KERI, meanwhile, forecast South Korea's private consumption and corporate capital spending to shrink 3.7 percent and 18.7 percent this year from a year ago, respectively, stung by COVID-19. Its exports are projected to contract 2.2 percent due to a sharp decline in global trade due to the coronavirus outbreak.

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