The Bank of Korea: "Daegu and Gyeongbuk Economies Severely Worsened Due to COVID-19 Impact"

Bank of Korea 'Regional Economic Report'

[Asia Economy Reporter Kim Eun-byeol] It has been revealed that the economy in the Daegu-Gyeongbuk region deteriorated sharply in the first quarter due to the impact of the novel coronavirus infection (COVID-19). The economy in other regions, including the Seoul metropolitan area, also worsened compared to the previous quarter.

According to the 'Regional Economic Report' released by the Bank of Korea on the 30th, the economy in the Daegu-Gyeongbuk area significantly worsened in the first quarter compared to the fourth quarter of last year. In terms of quarter-on-quarter direction, this is the first time since the Bank of Korea began publishing the Regional Economic Report in August 2013 that the Daegu-Gyeongbuk economy has deteriorated, except for the slight decline in the fourth quarter of 2016 (due to typhoons and the Gyeongju earthquake).

Looking at production trends in the Daegu-Gyeongbuk region, manufacturing activity contracted, and the service sector saw a sharp decline. In terms of demand trends, consumption dropped significantly, while facility and construction investments remained at similar levels to the previous quarter. Exports were found to have slightly decreased compared to the same period last year.

By industry, manufacturing production in the Daegu-Gyeongbuk region saw decreases in mobile phones, steel, and automobile parts, while display, machinery equipment, and textiles maintained levels similar to the previous quarter.

Service sector production activities in the Daegu-Gyeongbuk region were broadly and sharply contracted. Accommodation and food service industries saw large-scale events canceled or postponed due to concerns over COVID-19 infection, and dining out decreased sharply. The transportation sector suffered significant damage as most airlines operating at Daegu Airport suspended flights, and retail and wholesale businesses, centered around department stores and traditional markets, also contracted. In the real estate sector, housing transactions expanded mainly in Daegu in January, but in February, as COVID-19 spread and face-to-face transactions were avoided, sales transactions sharply declined.

Service sector production activities showed sluggishness not only in the Daegu-Gyeongbuk region but also in the Seoul metropolitan area, Gangwon region, and Jeju region. This is interpreted as the service sector being hit due to a domestic travel restraint atmosphere caused by COVID-19.

From the demand side, consumer sentiment in the Daegu-Gyeongbuk region was severely depressed. The Bank of Korea stated, "Monitoring results suggest that the severe recession may be somewhat alleviated as livelihood support policies are strengthened due to the designation of the Daegu-Gyeongbuk region as a special disaster area," but also warned, "If the COVID-19 situation is not resolved early, recovery will be greatly constrained."

Looking at consumption across all regions including Daegu-Gyeongbuk, sales of food and daily necessities through online channels increased, but due to depressed consumer sentiment and reduced outings,

sales of automobiles, clothing and cosmetics, and sports and leisure goods sharply declined, showing a significant decrease.

However, the number of employed persons in the Daegu-Gyeongbuk region increased in January and February, reversing the decline seen in the fourth quarter of last year. Consumer prices saw a somewhat expanded rise, and housing sale and rental prices also rose slightly. Corporate financial conditions in the Daegu-Gyeongbuk region deteriorated compared to the previous quarter during the first quarter.

Among Daegu-Gyeongbuk companies, manufacturing firms, especially automobile parts companies, experienced worsened financial conditions. Non-manufacturing sectors faced financial difficulties due to sharp declines in sales in retail, wholesale, and transportation companies.

A Bank of Korea official stated, "Although COVID-19 shows signs of calming domestically, the global spread of COVID-19 suggests that regional economies will continue to experience recent sluggishness." He added, "If the COVID-19 pandemic continues, it is inevitable that downward pressure on the economy will intensify."

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