KDI "Consumption and Exports Decline Due to COVID-19... Economic Contraction Deepens"

[Asia Economy Reporter Kwangho Lee] The Korea Development Institute (KDI) diagnosed on the 12th through the "Economic Trends May Issue" that "due to the negative impact of the novel coronavirus infection (COVID-19), consumption and exports have decreased, deepening the economic contraction."

KDI viewed the economy as 'sluggish' for nine consecutive months from April to December last year, but used the positive expression 'economic slowdown easing' in January and February this year. However, as COVID-19 spread, it described March as 'economic contraction' and raised the warning level to 'deepening economic contraction' from April onward.

In particular, it expressed concern that "domestic demand is rapidly contracting, centered on consumption."

In fact, retail sales in March decreased by 8.0% compared to the same period last year. The decrease rates for semi-durable goods and non-durable goods were 32.0% and 3.3%, respectively.

Due to the sharp decline in foreign tourists and the spread of social distancing, sales at duty-free shops (-48.8%) and department stores (-36.9%) dropped significantly.

Service industry production in March fell by 5.0%, with accommodation and food services (-32.1%) and arts, sports, and leisure services (-45.9%) sharply declining. Due to the sluggish service sector, total industrial production increased by only 0.6%.

Although facility investment in March showed a high growth rate of 9.8%, it was diagnosed that corporate investment sentiment has deteriorated, suggesting possible constraints in the future.

KDI evaluated that the decline in both the coincident index cyclical component (99.8 → 98.6) and the leading index cyclical component (100.2 → 99.6) in March indicates a deepening economic contraction.

Exports in April plunged by 24.3% due to the global spread of COVID-19. The average daily export amount also fell by 17.4%.

KDI forecasted that "given the sharp drop in the OECD leading index (99.6 → 98.8) and ongoing movement restrictions in major export countries such as the United States and the European Union, external demand weakness is expected to continue for the time being."

In this situation, contraction in the labor market is inevitable. The number of employed persons in March decreased by 195,000 compared to the same period last year due to the impact of COVID-19.

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