Ministry of Economy and Finance: "Real Economy Difficulties Widen Due to COVID-19 Impact" (Comprehensive)

Publication of Recent Economic Trends April Issue

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kim Hyunjung] The domestic real economy is rapidly contracting due to the spread of the novel coronavirus infection (COVID-19). As indicators showing the economic situation such as production, investment, employment, and consumption all declined, the government also mentioned negative expressions such as slowdown and difficulties one after another in the 'Recent Economic Trends' report, which contains the official economic assessment, and announced plans to prepare comprehensive countermeasures.

On the 17th, the Ministry of Economy and Finance stated in the April issue of 'Recent Economic Trends (Green Book)' that "Recently, our economy is experiencing continued domestic demand contraction due to the impact of COVID-19, with related employment indicators significantly slowing down and export uncertainties increasing, thereby expanding difficulties in the real economy."

In fact, all economic-related indicators such as industrial activity, consumption, and employment declined. In terms of domestic consumption, the sales volume of domestically produced passenger cars, which had decreased by 24.6% year-on-year in March to the level of January 2009 (after the global financial crisis), turned to an 11.9% increase in March. However, department stores (-34.6%), discount stores (-13.8%), and the number of Chinese tourists visiting Korea (-96.5%) all sharply declined. The number of Chinese tourists decreased more than the 69.3% drop in July 2017 during the Terminal High Altitude Area Defense (THAAD) incident, marking the largest monthly decline since statistics began in 1998. Domestic card approval amounts also decreased by 4.3%. This is the first decrease in approval amounts in 29 months since October 2017 (-0.8%). Regarding this, Kim Young-hoon, head of economic analysis at the Ministry of Economy and Finance, explained, "Domestic demand is expected to remain contracted until the COVID-19 situation ends," adding, "We are preparing policies to enable a rebound at the end of the crisis."

Industrial production (-3.8%) and service production (-3.5%) both decreased compared to the previous month, resulting in an overall industrial production decline of 3.5%. Facility investment (-4.8%) and construction investment (-3.4%) also fell. Employment (newly employed persons) decreased by 195,000 compared to the same month last year, marking a decline for the first time in over 10 years since May 2009.

Exports in March decreased by 0.2% year-on-year despite an increase in working days (1.5 days), due to factors such as a decline in export unit prices caused by falling oil prices. The average daily export amount dropped from $2.09 billion in March last year to $1.95 billion in March this year.

Economic sentiment also contracted significantly. The Consumer Sentiment Index (CSI) in March was 78.4, down 18.5 points from the previous month. The Manufacturing Business Survey Index (BSI) for March actual performance was 56, down 9 points from the previous month, and the April outlook was 54, down 15 points. Prices showed a 1.0% increase year-on-year as the rise in petroleum products narrowed but prices of agricultural, livestock, and fishery products expanded. Core inflation, which shows the underlying trend of prices, also rose by 0.7%.

The financial market saw a sharp decline in stock prices in March, a slight rise in exchange rates, and mixed trends in government bond yields with short-term yields falling and long-term yields rising. The housing market saw a 0.54% increase in sales prices in March compared to the previous month, with the rate of increase expanding, while jeonse (long-term deposit rental) prices rose by 0.19%, with the rate of increase narrowing.

Kim Young-hoon said, "Externally, financial market instability has somewhat eased due to active policy responses by governments worldwide, but as economic activities in major countries such as the United States and the European Union (EU) have significantly contracted, real indicators have worsened and concerns about a global economic recession have expanded." He added, "To minimize damage from COVID-19 and achieve early recovery, we will swiftly implement the 150 trillion won scale support measures already prepared through the Emergency Economic Meeting, and under a serious recognition of the situation, we will proactively prepare comprehensive countermeasures for the livelihood economy and jobs to respond with full force."

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