Hyundai Economic Research Institute: "Global Economy in Recession Stage Due to COVID-19... Prompt Execution of Supplementary Budget Needed"

On the 3rd, citizens are enjoying the cherry blossoms in full bloom at Seokchon Lake, which has been closed to prevent the spread of COVID-19, at Jamsil Hosugyo Bridge in Songpa-gu, Seoul. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Yu Je-hoon] The Hyundai Research Institute has diagnosed that the global economy has entered a recession phase due to the novel coronavirus infection (COVID-19). It also called for countermeasures such as the swift execution of supplementary budgets.

In the report titled 'Recent Global Economic Trends and Major Economic Issues' published on the 5th, the Hyundai Research Institute analyzed the economic conditions of major countries including the United States, Europe, China, Japan, India, and Vietnam, concluding as such.

In the case of the United States, concerns have been raised that consumption, which accounts for two-thirds of the gross domestic product (GDP), may decrease due to the impact of COVID-19. In fact, the US IHS Markit Manufacturing and Services Purchasing Managers' Index (PMI), which partially reflects the impact of COVID-19, fell sharply to 48.5 points and 39.1 points respectively, compared to the previous month (50.9 points and 49.4 points).

The Eurozone's manufacturing PMI also dropped significantly from 51.6 points in February to 31.4 points due to the impact of COVID-19. This level is even lower than the bottom during the global financial crisis. The Hyundai Research Institute stated, "A decline in the Eurozone's economic growth rate in the first quarter of this year is inevitable," adding, "If COVID-19 continues, the economy could enter a recession phase."

China is facing concerns of deflation along with sluggish consumption, declining investment and export growth rates due to the shock of COVID-19. The leading economic index has already been below the baseline since March 2018, indicating the possibility of continued economic slowdown in the future, according to the institute's analysis.

Additionally, Japan has seen decreases in industrial production, consumption, and exports since the beginning of this year, and India is also experiencing continued domestic demand sluggishness.

The Hyundai Research Institute commented, "An economic crisis is occurring where global supply shocks and a consumption cliff are happening simultaneously due to the spread of COVID-19," and warned, "If the situation prolongs, damage such as capital outflows from emerging countries will be inevitable."

Regarding the domestic economy, the Hyundai Research Institute advised, "To prevent a sharp economic slowdown caused by the spread of COVID-19, it is necessary to increase the fiscal execution rate in the first half of this year and to promote the swift execution of supplementary budgets," adding, "Policy efforts should focus on export recovery so that exporters can survive during the demand cliff period."

Furthermore, the Hyundai Research Institute stated, "The intensification of uncertainty in the global financial market causes deterioration in the psychology of economic agents, leading to a vicious cycle of increased volatility in the domestic financial market," and emphasized, "It is necessary to strengthen monitoring of financial market volatility and enhance international cooperation systems."

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