SEOUL, Sept. 14 (Korea Bizwire) — South Korea’s negative economic growth is expected to be inevitable for this year in the wake of the coronavirus outbreak, officials have said.
Local bureaucrats’ growing pessimism about Asia’s fourth-largest economy comes as economic activity has been battered by tougher social distancing measures in the greater Seoul area in the past two weeks.
The government has so far maintained a position that it would even draw up an additional supplementary budget to prevent the economy slipping into negative growth.
“The government sees it as difficult for (the economy) to post positive growth for this year,” Second Vice Finance Minister Kim Yong-beom told a radio program on Friday.
“The government task for the second quarter is to minimize the pace of economic contraction by controlling COVID-19 outbreaks and engineering a recovery in exports.”
It marks the first time for the government to officially mention that it may be difficult for South Korea to pull off positive growth this year.
The finance ministry has yet to adjust its growth projection for 2020. In June, it revised down its growth outlook to 0.1 percent from the 2.4 percent forecast late last year.
Last week, the state-run Korea Development Institute (KDI) cut the nation’s economic growth outlook to a contraction of 1.1 percent this year, a sharp downward revision of a 0.2 percent expansion in its May forecast, citing the fallout from the coronavirus pandemic.
The government’s turnabout and the KDI’s downward revision are largely attributed to a recent resurgence of the new coronavirus that is widely expected to delay the pace of an economic recovery.
Advance indicators show that domestic economic activity has worsened to levels in February and March, when the country was in the heat of the COVID-19 outbreak after the first case was reported in late January.
According the finance ministry, credit card spending at local restaurants tumbled 28.4 percent in the first week of September from a year earlier.
The number of moviegoers nose-dived 74.7 percent on-year during the fourth week of August, and that of subway users also plunged 41.4 percent on-year in the first week of this month.
According to data from Statistics Korea, retail sales in July contracted 6 percent from the previous month.
In order to keep the economy from lapsing into a further slump, the government is seeking to map out a series of countermeasures, including more investment by public corporations.
The coronavirus outbreak has plunged the South Korean economy into a recession, defined as two consecutive sessions of contraction, as its gross domestic product shrank 3.3 percent in the second quarter after a 1.3 percent on-quarter retreat three months earlier.