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(News Focus) Simmering recovery signs at risk of fading on virus resurgence

All News 11:05 August 24, 2020

By Kim Deok-hyun

SEJONG, Aug. 24 (Yonhap) -- The recent resurgence of coronavirus infections in Seoul and the neighboring area is likely to delay a swift recovery in South Korea's consumption and job market, policymakers and analysts said Monday.

However, the nation's export-reliant economy is expected to weather the impact of the recent resurgence unless the global economy imposes lockdown measures seen during March and April, when the first wave of the virus raged across the world, they said.

South Korea reported 266 new cases of the novel coronavirus Monday, bringing the nation's total caseload to 17,665, according to the Korea Centers for Disease Control and Prevention (KCDC).

Although the number of daily new infections fell below 300 for the first time in four days, it marked the 11th consecutive day of a triple-digit increase.

In early March, South Korea managed to bring massive outbreaks in the southeastern city of Daegu under control via aggressive testing, tracking and social distancing guidelines.

To battle the resurgence, the government expanded stricter social distancing rules nationwide on Sunday and is reviewing the need to raise the rules to the highest level.

This photo, taken June 1, 2020, shows piers for exports in Busan. (Yonhap)

This photo, taken June 1, 2020, shows piers for exports in Busan. (Yonhap)

In a report to the National Assembly, Bank of Korea Gov. Lee Ju-yeol said the pace of an economic recovery is expected to weaken, as infections have risen across the nation.

"After suffering sharp deterioration, the Korean economy showed some signs of an improvement on eased slumps in exports and consumption," Lee said. "But as virus cases have recently resurged, the economic recovery is expected to remain weak, and economic uncertainty has further heightened."

A senior government official, who spoke on the condition of anonymity, said a "V-shaped recovery" is unlikely to happen in the third quarter because of the recent resurgence of the coronavirus.

But the official said the resurgence is not expected to pose the major economic impact seen during late February and early March.

The pandemic has brought the global economy to a temporary standstill, dealing a severe blow to the nation's export-dependent economy.

South Korea's exports dropped for the fifth consecutive month in July, as overseas shipments collapsed, highlighting a drop in global trade volume and cross-border restrictions.

But the pace of decline slowed sharply as advanced nations lifted their coronavirus lockdowns.

In the latest sign that the decline of exports is easing, the nation's daily exports fell 3.7 percent in the first 20 days of August. Daily exports plunged by double digits between April and June.

Yonsei University's Institute of Engineering in Seoul is closed on Aug. 24, 2020, after a postgrad there tested positive for COVID-19. (Yonhap)

Yonsei University's Institute of Engineering in Seoul is closed on Aug. 24, 2020, after a postgrad there tested positive for COVID-19. (Yonhap)

South Korea's exports plummeted 16.6 percent in the April-June period, marking the worst performance since 1963. The nation's economy also contracted 3.3 percent in the second quarter from three months earlier, the sharpest contraction in over two decades.

Some analysts said the nation's economy could weather the impact of the recent resurgence because advanced nations have showed no signs of imposing lockdowns again.

Kang Hyun-ju, a researcher at the Korea Capital Market Institute, said the worst-case scenario is that advanced nations impose lockdowns amid the spread of local infections.

"At this stage, it is not a situation where we should accept the scenario," Kang said.

Earlier this month, the Organization for Economic Cooperation and Development (OECD) predicted that South Korea's economy is likely to shrink less than expected this year thanks to its successful response to the coronavirus pandemic.

In its latest report on South Korea, the OECD expected South Korea's economy to contract 0.8 percent in 2020 from a year earlier. The updated prediction marked an upgrade from its June forecast of 1.2 percent contraction and the highest growth estimate among 37 OECD member countries.

South Korea's private consumption is expected to drop 3.6 percent on-year in 2020, compared with an earlier estimate of a 4.1 percent fall. Total investment is predicted to expand 2.9 percent, a turnaround from an earlier forecast of 0.7 percent decline.

Exports, however, are projected to sink 5.7 percent this year, a downgrade from its June estimate of 2.6 percent contraction.

In late May, the BOK slashed its policy rate by a quarter percentage point to a record low of 0.50 percent in a bid to help cushion the economic impact of the COVID-19 pandemic.


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