The Bank of Korea "Delay in COVID-19 Containment Compared to May Economic Outlook Scenario"

[Asia Economy Reporter Kim Eun-byeol] The Bank of Korea stated that the global containment of the novel coronavirus infection (COVID-19) is being delayed compared to the basic scenario of the economic outlook it released last month.

Jijeong-gu, head of the Bank of Korea's Research Department, and others said in the 'Economic Outlook Using Infectious Disease Spread Models' released on the 29th, "From the current perspective, the timing of the global containment is delayed compared to the basic scenario prepared as of May," adding, "Although COVID-19 is showing signs of containment in Europe, it is rapidly spreading to emerging countries such as Brazil and India, leading to an increase in the global number of new confirmed cases."

The report explained that the increase in new confirmed cases is due to countries easing movement restrictions faster than the scenario despite the COVID-19 spread not being contained. Countries are quickly lifting movement restrictions to prevent further economic deterioration.

Last month, the Bank of Korea combined and analyzed the infectious disease spread research and prediction model (SIR) with the macroeconomic model (DSGE), lowering this year's growth forecast significantly from 2.1% to -0.2%, a 2.3 percentage point drop.

The -0.2% growth rate is based on the 'basic assumption' that the global number of COVID-19 confirmed cases will peak in the second quarter and stabilize in the second half of the year. If the 'pessimistic scenario' is applied, where confirmed cases increase until the third quarter and the spread prolongs, the decline in this year's growth rate is expected to reach -1.8%.

While lifting lockdowns or movement restrictions positively impacts growth by resuming economic activities, it also negatively affects the economy as the number of confirmed cases rises and economic activities contract again. Therefore, so far, the growth forecast has not significantly deviated from the basic scenario set by the Bank of Korea.

Additionally, the Bank of Korea pointed out in the report that a characteristic of the COVID-19 related economic analysis and outlook is that when the number of confirmed cases is large as it is now, the future number of confirmed cases and economic impact are greatly influenced by the intensity of quarantine measures. It also noted that as a small open economy, South Korea is significantly affected not only by domestic COVID-19 developments but also by the global COVID-19 situation.

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