BOK: "Post-Corona, ICT and Biohealth Are Keys... Employment Recovery Is Slow"

Report on Economic Structure Changes and Impacts After COVID-19

[Asia Economy Reporter Kim Eun-byeol] The Bank of Korea identified the ICT and biohealth industries as key sectors to boost potential growth rates in the 'post-COVID-19' era in its report titled "Changes in Economic Structure After the Novel Coronavirus Infection (COVID-19) and Its Impact on Our Economy," published on the 29th. With a declining birthrate trend and changes in industrial structure leading to a slowdown in labor input, and global trade contraction reducing capital's contribution to growth, investing in high-productivity industries is seen as the key to raising growth rates. However, it also pointed out that while IT-related jobs increase, existing jobs in manufacturing and services may disappear, potentially causing disparities in the labor market.

◆ "ICT and Biohealth Present Opportunities to Increase Productivity" = Since the spread of COVID-19, ICT investment plans have surged worldwide. As activities requiring non-face-to-face (untact) contact increased, a faster-than-expected transition to a digital economy was anticipated. The number of users of Microsoft (MS) Teams, an online collaborative platform, more than doubled from 32 million on March 12 to 75 million by the end of April. In Korea, new memberships of Market Kurly aged 50 and above surged by 58% year-on-year from February 19 to March 18, with sales increasing by 55%.

The Bank of Korea expects ICT to offset the negative impacts of deglobalization. Trade in related products such as semiconductors and communication equipment is increasing, and the use of artificial intelligence (AI) and Internet of Things (IoT) technologies in trade itself is rising, creating a positive effect. Investments in 'smart factories' by manufacturers who experienced production disruptions are also expected to expand. According to MarketsandMarkets, the global smart factory market is projected to grow at an average annual rate of 4.0% until 2025.

Interest in the 'green economy' and 'low-carbon economy,' which seemed to be slowing, is also expected to continue. Lee Ji-ho, head of the Bank of Korea's survey team, stated, "If environmental regulations are established mainly in advanced countries, Korea cannot be exempt and needs to prepare." Recently, regulations have been tightening around ships and automobiles. The biohealth industry is also an area to watch. A Bank of Korea official said, "The mobile healthcare industry is likely to maintain a high growth rate of over 30% annually."

◆ "Possibility of Jobless Economic Recovery... Need for Workforce Retraining" = However, employment rate recovery is expected to be difficult. If the unemployment rate rises as much as during the financial crisis or foreign exchange crisis due to the COVID-19 situation, it may take 2 to 4 years to recover the employment rate. If the employment shock expands to the level of the foreign exchange crisis, the employment rate is expected to drop by 5.5 percentage points. Approximately 965,000 workers per month could lose their jobs over about 17 quarters. The report expressed concern, stating, "With the continued decline in the working-age population and a slowdown in economic activity participation due to the crisis's aftermath, the possibility of a jobless recovery cannot be ruled out."

While new jobs will increase with the transition to a digital economy, employment recovery in vulnerable sectors such as low-skilled jobs is expected to be slow. Prolonged unemployment may also reduce human capital itself. When the economy worsens, companies are more likely to maintain existing employees rather than hire new ones, and job seekers may give up entirely, becoming discouraged workers. Lee Ji-ho said, "During the process of economic restructuring, new workforce education is necessary to ensure timely labor supply for needed jobs," adding, "Retraining is needed for workers who have left manufacturing."

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