SEJONG, April 14 (Yonhap) -- The International Monetary Fund (IMF) predicted Tuesday that South Korea's economy would shrink 1.2 percent this year as the coronavirus pandemic disrupts global businesses and lockdown measures ravage consumer demand.
The IMF forecast is in line with projections by many global ratings agencies, which expected South Korea to suffer the first annual contraction of its economy since 1998, when the Asian financial crisis hit the nation.
In January, the IMF expected South Korea's economy to grow 2.2 percent this year.
The IMF said the "forecast embodies Korea's comprehensive approach in containing the COVID-19 outbreak and quick economic policy response, which have helped mitigate the negative impact on domestic activity."
"However, given Korea's high degree of openness, the growth prospects are constrained by very weak external demand, as reflected in sharply lower growth projections for Korea's main trading partners," it said.
If the pandemic is brought under control in the second-quarter of this year, the IMF predicted that South Korea's economy could grow 3.4 percent in 2021.
The rapidly-spreading coronavirus pandemic is expected to cause a global recession this year as it has shut down factories and cities.
The global economy is expected to shrink 3 percent this year, compared with its January prediction of a 3.3 percent expansion, the IMF said.
Under the scenario that the pandemic is waned in the second quarter, the global economy could grow 5.8 percent next year, the IMF said.
The U.S. economy is expected to shrink 4.7 percent this year, while the Chinese economy is forecast to grow 1.2 percent this year, the IMF said.
Global trade is likely to fall 11 percent this year and oil prices are predicted to be averaged at $35.61 per barrel this year, down 42 percent from a year ago, the IMF said.
Last week, the Bank of Korea (BOK) kept its policy rate frozen at an all-time low of 0.75 percent, after delivering an emergency rate cut on March 16.
But the central bank said its annual growth target of 2.1 percent may not be met this year.
Last month, the Korean government unveiled plans to double the size of its emergency-financing aid package to 100 trillion won for businesses here under growing stress from the coronavirus pandemic.
Many analysts at home and abroad expected Korea's economy to shrink in the first half of this year.
Global rating agency Fitch forecast the Korean economy to shrink 0.6 percent in the first quarter and 0.9 percent in the second quarter. The country last saw its economy shrink for more than two consecutive quarters in 2003.
Some believe two consecutive quarters of contraction may place the country's annual figures in the red as well.
S&P Global Ratings forecast Korea's economy to shrink 0.6 percent on-year this year.
In the first 10 days of April, Korea's exports dropped 18.6 percent on year to $12.2 billion.
By segment, exports of memory chips, a key item, fell 1.5 percent, and those of automobiles also declined 7.1 percent over the 10-day period from a year earlier.
By country, shipments to China dropped 10.2 percent on-year, while shipments to the United States fell 3.4 percent.
The Korean economy grew 2 percent from a year earlier last year, the slowest on-year growth since 2009.
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