Resurgence of virus may prompt Korean economy back into contraction: KDI

SEJONG, Sept. 7 (Yonhap) -- South Korea's economy is likely to reverse back into a contraction unless health authorities swiftly contain the recent resurgence of the new coronavirus, a state-run think tank said Monday.

"A resurgence of COVID-19 has increased the probability that the Korean economy will reverse back into a contraction," the Korea Development Institute (KDI) said in its English-language Monthly Economic Trends publication.

The nation's industrial output inched up in July, but consumption dropped amid the coronavirus pandemic. Industrial production rose 0.1 percent on-month in July, following a 4.1 percent on-month gain in June.

Retail sales dipped 6 percent from a month earlier, and facility investment declined 2.2 percent on-month.

Exports extended their slump to a sixth month in August as the resurgence of the new coronavirus around the globe continued to strain business activities.

However, the pace of decline in exports has eased as developed nations lifted their lockdown measures.

"Exports have gradually regained momentum as economic activity partially bounced back in major countries," KDI said.

The nation's economy shrank 3.3 percent on-quarter in the first quarter of this year, the sharpest quarterly contraction since the first quarter of 1998.

South Korea's economy is expected to contract 1.2 percent this year as the coronavirus pandemic and lockdown measures ravaged global trade and consumption, according to the Organization for Economic Cooperation and Development (OECD).

The OECD forecast is bleaker than a prediction by the Bank of Korea, which forecast the Korean economy to contract 0.2 percent this year.

kdh@yna.co.kr
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