South Korean economy suffers biggest contraction since financial crisis
Edward White in Wellington
South Korea’s economy suffered its deepest contraction since the global financial crisis as the coronavirus pandemic battered the country’s massive technology and industrial exporters.
Gross domestic product fell 1.4 per cent in the first three months of the year, the Bank of Korea reported on Thursday, the biggest drop since a 3.3 per cent drop in final three months of 2008. The contraction compares to growth of 1.3 per cent in the fourth quarter of 2019 when hopes were building for a recovery in the country’s critical exports of computer chips and smartphones.
Sweeping lockdowns in China, South Korea’s biggest export market, in January and February led to production disruptions and softer demand for companies like tech giants Samsung, LG and SK Hynix and carmaker Hyundai.
A rapid outbreak of Covid-19 in February in South Korea — which was for a time the worst affected country outside China — saw a further hit to the local demand for smaller businesses.
Despite South Korea’s success in stemming the outbreak, Moon Jae-in, the South Korean president, on Wednesday warned that the economic crisis stemming from coronavirus was only just beginning as he revealed a sharp increase in spending to deal with the fallout of the pandemic to almost $200bn.
Economists cautioned, however, that despite the record spending and low interest rates, the government’s moves might still be insufficient given the exposure of South Korea’s export-dependent economy to a global recession.
Source: Economy - ft.com
