Q1 Growth Rate at -1.4%, Lowest Since Financial Crisis... Due to Reduced Consumption from COVID-19 (Comprehensive)

If Growth Continues at 0.6~0.7% for Three Consecutive Quarters, 'Positive Growth Expected This Year'

Due to the impact of COVID-19, consumer sentiment is shrinking, and on the 11th, Lotte Mart Seoul Station branch in Jung-gu, Seoul, is showing a quiet scene. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Jang Sehee] South Korea's economic growth rate for the first quarter of this year recorded -1.4%, marking the lowest point since the 2008 global financial crisis. This decline is due to simultaneous sluggishness in private consumption and exports.

On the 23rd, the Bank of Korea announced that the real Gross Domestic Product (GDP) for the first quarter decreased by 1.4% compared to the previous quarter. This is the lowest in 11 years and 3 months since the fourth quarter of 2008 (-3.3%).

Regarding this, Park Yangsoo, Director of the Statistics Department at the Bank of Korea, explained, "Compared to other countries like China, the -1.4% figure seems relatively less shocking, but looking at past economic growth patterns, it is difficult to say this is a satisfactory level."

Private consumption fell by 6.4%, declining across goods consumption such as passenger cars and clothing, as well as services including food and accommodation, and entertainment and culture. This represents the most severe impact since the 1997 Asian financial crisis.

Exports decreased by 2.0%, despite increases in semiconductors, due to declines in automobiles, machinery, and chemical products. Imports also dropped by 4.1%, with reductions in mining products (such as crude oil) and automobiles.

Examining by economic activity, both manufacturing and service sectors shifted to a decline.

By sector, agriculture, forestry, and fisheries increased by 0.1%, mainly driven by livestock farming. Electricity, gas, and water supply rose by 5.7%, centered on electric power companies, and construction grew by 0.3%, supported by civil engineering projects.

Although manufacturing and semiconductors increased, the service sector showed a 2.0% decrease, mainly in wholesale and retail trade, accommodation and food services, and transportation.

Meanwhile, real Gross Domestic Income (GDI) for the first quarter fell by 0.6% compared to the previous quarter. Director Park stated, "Due to improvements in terms of trade, the first quarter economic growth rate (-1.4%) appeared higher," adding, "The improvement in terms of trade is attributed to export products such as liquid crystal display (LCD) semiconductors rising more in price than import prices."

The Bank of Korea took a cautious stance regarding positive growth for this year. Director Park said, "Whether the second quarter is negative and the extent of that negativity will affect the annual growth rate."

He added, "If from the second quarter onwards, growth rates of 0.6 to 0.7% compared to the previous quarter continue for three consecutive quarters, the annual growth rate will exceed 1%. Arithmetically, if three consecutive quarters show growth rates in the 0% range and economic activity in the fourth quarter reaches the level of the fourth quarter of last year, zero growth might be possible this year."

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