Oxford Economics "Korean Economic Growth Forecast Downgraded from 1.8% to 1.4%"... Impact of COVID-19

[Image source=Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Oxford Economics, a UK economic analysis institute, announced on the 11th that it lowered South Korea's economic growth forecast for this year from 1.8% to 1.4%, considering the impact of the spread of the novel coronavirus infection (COVID-19).

In a report released on the same day, Oxford Economics stated, "The shock to private demand caused by the spread of COVID-19 has increased," and added, "Despite the government's expansion of fiscal spending, we have downgraded South Korea's GDP growth forecast for this year accordingly." It further predicted, "Global demand has weakened due to the spread of COVID-19, and China's economic activity recovery is slower than expected, putting significant pressure on South Korean exports."

The institute lowered its forecast for South Korea's private consumption and investment growth rates this year by 0.6 percentage points each, to 1.4% and 1.1%, respectively. In particular, private consumption in the first quarter was previously forecasted at 1.7%, but has been lowered to 0.9%. Regarding investment, it noted that uncertainties in the global economy have greatly increased due to the spread of COVID-19, financial market turmoil, and the oil price war, lowering the first quarter investment growth forecast by 0.4 percentage points.

However, it assessed that additional government fiscal spending would help the South Korean economy and that the decline in international oil prices could have some positive effects. Oxford Economics stated, "The possibility that the decline in international oil prices will stimulate consumption is small, but it can increase the current account surplus," and predicted, "If Brent crude oil prices remain around $30 per barrel this year, South Korea's current account surplus as a percentage of GDP could rise to the 6% range."

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