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The Korean Economy : One Year after the COVID-19 Outbreak

Author The Korean Economy : One Year after the COVID-19 Outbreak Date 2021.05.10 Issue No 109
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○ The COVID-19 pandemic is estimated to have caused a decline of 3%p in Korea’s GDP growth and 7%p in private consumption growth, as well as the loss of 460,000 jobs.

- Compared to previous crises, the pandemic-induced economic slowdown was the nation’s second largest, following that suffered in the wake of the 1997-98 Asian financial crisis, with severe shocks to private consumption and employment.


○ After bottoming out in the second quarter of 2020, however, the Korean economy has recovered, albeit at varying rates by sector, amid lingering weakness in the job market.

- While manufacturing’s output and exports have returned to pre-pandemic levels, employment, private consumption, and service output in 2021’s first quarter lagged behind.


○ Considering consumer price trends and GDP breakdown by sector, the slowdown was caused by sluggish domestic demand, especially private spending, rather than the supply side or overseas demand.

- Early in the outbreak, supply disruptions in certain industries pounded the economy, but weak consumption was the main culprit for the slowdown.


○ The pandemic has had a discriminatory, almost polarizing, impact on industries. Sectors have shown an extremely wide variance in growth rates during COVID-19 than in other major economic crises.

- While face-to-face service sectors such as the arts, sports, and hospitality were hit hard, ICT segments like biotech, semiconductors and e-commerce thrived.


○ Top priority on public health protection is recommended, as is offsetting economic damage with fiscal compensation rather than weighing the pros and cons of such protection against economic losses to induce cooperation from the private sector and cushion the shock to the economy.


○ A year’s worth of time-series data has been collected since the pandemic’s outbreak, so this study assesses the coronavirus’s impact on the Korean economy and industries, the development of the ensuing effects over time, the impact’s pathways and distribution across sectors, and policy implications.