Major Institutions Lower Growth Rate Forecasts... Hong Warns "Possibility of Negative Growth Rate in Q1"

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] An analysis has emerged that South Korea's domestic gross domestic product (GDP) growth rate for this year will remain in the 0% range. This is due to the domestic market and exports being hit by the spread of the novel coronavirus infection (COVID-19).

Global investment bank (IB) JP Morgan on the 20th revised down South Korea's growth forecast to 0.8%. Before the outbreak of COVID-19, JP Morgan's projected growth rate was 2.3%. The forecast was significantly revised as the economic recession signals caused by the spread of COVID-19 became serious.

International credit rating agency Fitch also lowered South Korea's growth rate from the previous 2.2% to 0.8% on the 19th (local time). This is a decrease of as much as 1.4 percentage points.

In its global economic outlook report released that day, Fitch stated, "The South Korean economy is expected to enter a recession in the first half of the year and then rebound in the second half." It particularly forecasted negative growth compared to the previous quarter for the first quarter (-0.6%) and second quarter (-0.9%), respectively. The growth rates for the third and fourth quarters are projected at 0.9% and 0.8% quarter-on-quarter. Fitch said in the report, "The South Korean economy is heavily dependent on foreign trade and is part of international and regional value chains, so it is being negatively affected by COVID-19." It also analyzed that the decline in consumption will affect the reduction in the growth rate.

In this regard, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, also stated at a foreign press briefing, "There is a possibility that South Korea's economic growth rate will turn negative in the first quarter of this year."

Deputy Prime Minister Hong explained, "Although it is not appropriate to speak as a policy official, considering the ripple effects on domestic and foreign consumption, investment, and exports, such a case is also being taken into account." He added, "We will do our best through early fiscal spending to prevent such a situation from occurring."

This content was produced with the assistance of AI translation services.