Government: "Real Economy Downside Risks Expand Due to COVID-19 Impact"

Ministry of Economy and Finance 'Recent Economic Trends' May Issue
"Continued Deterioration of Major Countries' Economic Indicators... Ongoing Concerns of Global Recession"

[Asia Economy Reporter Kwangho Lee] The government has diagnosed that difficulties in the real economy, such as domestic demand, employment, and exports, are expanding due to the novel coronavirus infection (COVID-19).

On the 15th, the Ministry of Economy and Finance stated in the May issue of 'Recent Economic Trends (Green Book)' that "Recently, our economy is experiencing an expansion of downside risks in the real economy, such as continued poor employment indicators due to domestic demand contraction caused by COVID-19, and an increasing decline in exports."

The Ministry also assessed, "Externally, while economic activities in major countries are gradually resuming and financial market instability has somewhat eased, the worsening trends in major countries' economic indicators continue, and risk factors such as instability in emerging countries are expanding, sustaining concerns about a global economic recession."

In fact, economic indicators related to industrial activity, consumption, and employment all declined. According to preliminary consumption data for April, despite an increase in passenger car sales, department store and discount store sales decreased, resulting in a 5.7% decline in domestic card approval amounts. This is a 1.4 percentage point larger decrease than the -4.3% recorded in March, which turned negative for the first time in 2 years and 5 months.

Department store and discount store sales fell by 14.7% and 0.9%, respectively, compared to a year earlier. However, domestic sales of Korean passenger cars increased by 11.6%, offsetting some of the downturn.

With the rise of non-face-to-face consumption due to COVID-19, online sales increased by 19.9%.

The number of Chinese tourists visiting Korea decreased by 99.1% compared to a year ago, widening the decline from the previous month (-98.6%).

The Consumer Sentiment Index (CSI) for April was 70.8, falling below the baseline (100) and down from March's 78.4, reflecting frozen consumer sentiment.

In the same month, consumer prices rose by 0.1% year-on-year due to a slowdown in the price increase of agricultural, livestock, and fishery products, and declines in petroleum and public service prices.

The number of employed persons in April decreased by 476,000 compared to a year earlier, marking the largest decline since February 1999 (658,000), when the effects of the foreign exchange crisis were felt.

Other major indicators for March show that total industrial production (seasonally adjusted, excluding agriculture, forestry, and fisheries) decreased by 0.3% compared to the previous month.

Due to the impact of 'social distancing,' service industry production fell by 4.4%, recording the largest drop since statistics began in 2000. Conversely, manufacturing production increased by 4.6% as issues with automobile parts supply were resolved. Retail sales in March decreased by 1.0% from the previous month, but facility investment rose by 7.9%. Construction performance, which reflects actual construction by construction companies, increased by 2.6%.

Exports in April decreased by 24.3% compared to a year earlier due to reduced demand in major countries, production disruptions, falling oil prices, and fewer working days.

In April, the domestic financial market saw stock prices rise due to a slowdown in the spread of COVID-19, the exchange rate slightly declined (strengthened), and government bond yields fell.

The housing market saw an expansion in the rise of sale prices, but the increase in jeonse (long-term deposit rental) prices narrowed.

The Ministry of Economy and Finance stated, "We will maintain a serious awareness of the current economic situation and concentrate the government's capabilities around the Central Disaster and Safety Countermeasure Headquarters to prepare measures for early resolution of the situation and response to employment shocks."

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