[Economic Outlook] How Much More Will the COVID-19 Pandemic Shrink the Economy?

(Photo) [Image source=Yonhap News]

[Asia Economy Reporter Joo Sang-don] This week, data on March industrial activity trends, April consumer sentiment, business survey indices, and export performance will be released. These indicators will help assess the extent of domestic economic contraction due to the impact of the novel coronavirus disease (COVID-19).

First, Statistics Korea will announce the 'March Industrial Activity Trends' on the 29th. In February, total industrial production decreased by 3.5% compared to the previous month due to declines in manufacturing, services, and construction sectors. This is the largest drop in nine years since February 2011, when total industrial production fell 3.7% due to the foot-and-mouth disease outbreak. Service production increased in finance and insurance, water supply, sewage and waste management, and real estate sectors, but decreased in accommodation and food services, transportation, and warehousing, resulting in a 3.5% decline compared to the previous month. In particular, accommodation and food services saw an 18.1% decrease, with reductions in both restaurants and pubs as well as lodging businesses. Consumption also took a direct hit. The retail sales index fell 6.0% from the previous month, with sales of semi-durable goods such as clothing (-17.7%), durable goods like passenger cars (-7.5%), and non-durable goods including cosmetics (-0.6%) all declining. This is the largest drop since February 2001 (-7.0%). The 'Coincident Index of Economic Activity,' which reflects the current economic situation, plunged 0.7 points from the previous month, marking the largest decline in 11 years and 2 months since January 2009 (-0.7 points) during the global financial crisis. The 'Leading Index of Economic Activity,' which forecasts future economic conditions, remained unchanged from the previous month.

The Bank of Korea will release the 'April 2020 Consumer Sentiment Survey' on the 28th. The Consumer Confidence Index (CCSI) for March was 78.4, down 18.5 points from the previous month. This is the lowest level since March 2009 (72.8), during the height of the global financial crisis. The decline from the previous month is the largest since the statistics began in July 2008. The COVID-19 impact has already caused consumer sentiment to freeze sharply in March.

On the 29th, the Bank of Korea will announce the 'April 2020 Business Survey Index (BSI) and Economic Sentiment Index (ESI).' Last month, the BSI was 54, down 11 points from the previous month. The business sentiment in March fell to levels seen during the financial crisis, with deterioration observed across all company sizes and industries. The manufacturing BSI recorded 56, down 9 points from 65 in the previous month. This is the lowest manufacturing BSI since March 2009 (56).

The Ministry of Trade, Industry and Energy will release the 'April Export Performance' on the 1st of next month. Export value from April 1 to 20 was $21.7 billion, down 26.9% from the previous year. The global spread of COVID-19 has severely impacted exports due to sluggish global trade, economic slowdown, and falling oil prices. The average daily export value, adjusted for working days, also decreased by 16.8%. Since the number of working days dropped from 16.5 days last year to 14.5 days this year, it is difficult to attribute the overall export decline solely to fewer working days. The average daily export value was $1.5 billion, $300 million less than $1.8 billion during the same period last year. A significant decline in total exports for April is also expected.

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