SEJONG, Sept. 8 (Yonhap) — South Korea’s economic recession is expected to be deeper than expected this year due to the coronavirus pandemic, and the pace of recovery may be delayed as there is no end in sight for the pandemic, a state-run think tank predicted Tuesday.
Korea Development Institute (KDI) downgraded 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.
The nation’s economy is expected to expand 3.5 percent next year, also down 0.4 percentage point from the May prediction, KDI said.
The KDI’s latest forecast is higher than that of the Bank of Korea, which expected the nation’s economy to shrink 1.3 percent this year.
In cutting its economic outlook, the KDI attributed the decision to a recent resurgence of the new coronavirus that will delay the pace of an economic recovery.
Pounded by the coronavirus outbreak, the nation’s economy has plunged into a recession as its gross domestic product shrank 3.3 percent in the second quarter after a 1.3 percent on-quarter retreat three months earlier.
Jung Kyu-chul, a senior KDI researcher, told reporters: “The pace of our economy’s recovery is expected to be very slow. Based on this outlook, it is not a V-shaped recovery.”
Private consumption is expected to contract 2 percent this year but grow 5.3 percent next year, the KDI said.
Exports are expected to shrink 4.2 percent this year but expand 3.4 percent next year.
The number of employed people is expected to contract 150,000 this year, the KDI said.
South Korea’s exports extended their slump to a sixth month in August as the resurgence of the new coronavirus around the globe continued to strain business activities.
Outbound shipments came to US$39.6 billion last month, down 9.9 percent from $44 billion posted a year earlier.
However, per-day exports fell 3.8 percent in August, marking the smallest decline in seven months.
Analysts said global demand for Korean goods is likely to pick up later this year as advanced economies have lifted virus lockdown measures.