[Weekly Review] The Power of COVID-19 Was Strong... Economic Indicators Like Production and Exports Hit 'Worst'

Asia Economy DB=Photo by Honam Moon munonam@

[Asia Economy Reporter Kim Bo-kyung] The novel coronavirus infection (COVID-19), which swept the globe, has severely impacted the real economy, causing various economic indicators such as production and exports to plummet to levels comparable to the global financial crisis. The economic contraction due to COVID-19 dealt a direct blow to service sector production, including accommodation and food services, and eroded jobs among vulnerable groups such as temporary and daily workers. Movement restrictions and manufacturing plant shutdowns in various countries led to decreased import demand, adversely affecting our exports.

◆ COVID-19 Hits Service Industries like Accommodation and Food Services = As outings and consumption decreased due to COVID-19, service sector production recorded the largest decline since the index was first compiled. According to the 'March 2020 Industrial Activity Trends' released by Statistics Korea on the 29th of last month, total industrial production fell by 0.3% compared to the previous month, marking three consecutive months of decline. While the supply issues of automobile parts were partially resolved, leading to a 4.6% increase in the manufacturing sector, the service sector decreased by 4.4%. This was the largest decline ever recorded in the service sector since statistics began. Accommodation and food services (-17.7%), transportation and warehousing (-9.0%), education (-6.9%), and wholesale and retail trade (-3.3%) all decreased. During the same period, consumption dropped by 1.0%, while facility investment increased by 7.9%. The coincident index cyclical component (-1.2 points) and leading index cyclical component (-0.6 points) showed the largest declines since the 2008-2009 financial crisis.

◆ Exports Plummet... Largest Drop in 11 Years = Due to the shock of COVID-19, exports last month decreased by 24.3% compared to the previous year. As the COVID-19 outbreak intensified, exports in April took a direct hit. According to the Ministry of Trade, Industry and Energy on the 1st, April exports amounted to $36.92 billion, down 24.3% ($11.86 billion) from the same month last year. This is the largest decline since May 2009, when exports fell 29.4% amid the financial crisis. Imports were $37.87 billion, down 15.9% ($7.18 billion) from the same month last year. As a result, the trade balance recorded a deficit (-$950 million) for the first time in 99 months. The export slump last month was influenced by decreased demand in major markets such as the United States and the European Union (EU) due to the full-scale spread of COVID-19. Demand shrank due to movement restrictions and factory shutdowns in various countries, leading to a decline in exports.

Hong Nam-ki, Deputy Prime Minister for Economy and Minister of Strategy and Finance / Photo by Hyunmin Kim kimhyun81@

◆ Corporate Business Sentiment Falls to Financial Crisis Levels = COVID-19 has dragged corporate business sentiment down to levels seen during the financial crisis. According to the 'April Business Survey Index (BSI) and Economic Sentiment Index (ESI)' released by the Bank of Korea, the BSI for overall industrial business performance was recorded at 51, down 3 points from the previous month. This is the lowest level since December 2008 (51). The manufacturing sector BSI fell 4 points to 52 compared to the previous month, with particularly negative outlooks in the automobile and semiconductor industries. The non-manufacturing BSI dropped 3 points from 53 to 50, setting a new all-time low. This was due to sluggish sales of industrial electricity and gas and a decrease in construction orders. The BSI for overall industrial business outlook fell to 50, the lowest since January 2009 (49). If the forecast holds, next month's BSI is expected to worsen beyond the levels seen during the financial crisis.

◆ Decrease in Number of Workers... Daily Workers and Service Sector Hit Hard = The impact of COVID-19 on the labor market resulted in a decrease of 225,000 workers in March compared to last year. According to the 'March Business Labor Force Survey' released by the Ministry of Employment and Labor, the number of workers in businesses with one or more employees was 18.278 million, down 225,000 (-1.2%) from the same month last year. This is the first time since statistics began that the number of business workers has decreased. This is attributed to economic activity contraction, social distancing, and school reopening delays. By employment status, temporary and daily workers decreased by 124,000 (-7.0%), suffering the largest job impact from COVID-19. By industry, accommodation and food services decreased by 153,000 (-12.0%), and educational services decreased by 107,000 (-6.7%).

◆ 'Births Decrease and Deaths Increase' Natural Population Decline for Four Consecutive Months = With births decreasing and deaths increasing, South Korea's population experienced a natural decline for the first time for four consecutive months. According to the 'February Population Trends' released by Statistics Korea on the 28th of last month, the number of births nationwide in February was 22,854, down 2,919 (11.3%) from the same period last year. This is the lowest number recorded for February since statistics began in 1981. The number of births has continued to decline year-on-year for 51 consecutive months since December 2015. Looking at the number of deaths in February, it was 25,419, an increase of 2,492 (10.9%) compared to one year earlier. This is the highest number of deaths recorded for February since statistics began in 1983. As a result, the natural increase (births minus deaths) in February was recorded at minus 2,565, marking the first time since 1983 that February showed a negative natural increase.

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