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How Manufacturing Saved the Korean Economy during the COVID-19 Crisis

Author Hwang Kyung In Date 2021.05.06 Issue No 108
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○ Korea’s manufacturing sector, the third most competitive in the world, has helped it weather the COVID-19 pandemic.

- While the global economy shrank 3.3 percent in 2020, its worst slowdown since the 2008 global financial crisis, the Korean economy contracted by just one percent thanks to its manufacturing sector.

- Korea’s success in stabilizing its economy faster than other major economies stemmed from its highly competitive manufacturing industry, which is the world’s third most competitive per the United Nations Industrial Development Organization’s (UNIDO) Competitive Industrial Performance (CIP) index.

 

 Amid depressed domestic demand, manufacturing’s resilience as seen in its export recovery ensured economic stabilization in Korea.

- Contrary to initial fears, Korea’s export growth has exhibited a V-shaped recovery after falling to its lowest point in April 2020, when overseas shipments had fallen by 25.6 percent.

- Domestic demand was unlikely to stimulate economic growth due to the pandemic, but the Korean economy made a rapid recovery thanks to manufacturing’s solid competitiveness and export growth.

- The drivers of Korean exports have been leading items such as semiconductors, displays, and petrochemicals, showing how resilient the nation’s industrial structure is against crisis.

 

 Despite this result, the country’s industrial innovation strategy is in need of an upgrade for the post-pandemic era.

- As global competition in the transition to a digital and sustainable economy accelerates amid the ongoing COVID-19 pandemic, Korea should upgrade its industrial structure to ensure resilience against crisis but also to prepare to lead the global innovation competition in the post-pandemic era.

- The rise in the U.S.-China rivalry over technological hegemony is likely to reshape global supply chains, which underlines the importance of enhancing allied collaboration in industry and commerce, diversifying export markets, and stimulating business activity.