The Impact of the COVID-19 Pandemic on Korea’s Regional Economies
|Author||Kang, Duyong; Min,Sunghwan||Date||2021.06.29||Issue No||113|
○ In this paper, we estimate the impact of the COVID-19 pandemic-induced recession on Korea's regional economies. We have found that the recession has hit the island province of Jeju and the cities of Incheon and Ulsan the hardest, in that order. For Jeju in particular, we estimated that the province’s real gross regional domestic product (GRDP) declined by 9% compared to the pre-pandemic trend, a figure 2.5 times greater than the estimated impact of the pandemic on nationwide GDP growth.
○Regional COVID-19 infection rates do not appear to be meaningfully correlated with the regional distribution of economic shocks. Rather, the regional industrial structures seem to account for the distribution of economic shock better. GRDP growth declines were steepest in the regions where particularly hard-hit subsectors (such as traditional, face-to-face services, among others) comprise a large portion of the regional economy. In Jeju, the hardest-hit region, the share of hospitality businesses in the regional economy is greatest in the nation and the share of transport and culture businesses is the second-largest. Incheon has the highest share of transport businesses in the nation, with a large gap between it and the next-highest region.
○The regions that suffered the most are also lagging in the ongoing recovery. The city of Seoul and surrounding province of Gyeonggi, where the economic impact of the pandemic was comparatively mild, recovered pre-pandemic growth trends by the first quarter of 2021, while the economies of Jeju, Incheon, and the province of Gangwon were still slumping by that quarter.
○As the impact and rate of recovery vary greatly by region, should the gap in the pace of regional economic recovery persist, corrective measures will be necessary to address the imbalance. An appropriate policy response could take either of the following forms: (1) strengthen support for the industries and subsectors in the deepest slumps, or (2) provide direct support for economies in the hardest-hit regions.