Government "Possible Rebound in Q3 and Q4"... Experts Predict "U-Shaped Recovery"

Q2 Growth Rate at -3.3%... U-Shaped Recovery Expected Rather Than V-Shaped

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is delivering opening remarks at the "11th Emergency Economic Central Countermeasures Headquarters Meeting and 1st Korean New Deal Related Ministers' Meeting" held at the Government Seoul Office in Jongno-gu, Seoul on the 23rd. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Jang Sehee] With the domestic gross domestic product (GDP) growth rate hitting a low of -3.3% in the second quarter of this year, the government expects a rebound in growth in the third quarter if the COVID-19 situation continues to improve. Experts predict that our economy will follow a gentle U-shaped recovery. However, external uncertainties such as the global resurgence of COVID-19 remain, and with continued sluggish consumption and employment instability, it is premature to conclude that the economy is fully recovering.

On the 23rd, the Bank of Korea announced that the real GDP (preliminary figure) for the second quarter was 447.4 trillion won, down 3.3% from the previous quarter. This is the lowest level since the first quarter of 1998 (-6.8%) during the International Monetary Fund (IMF) foreign exchange crisis. When comparing to the second decimal place, it was even worse than the fourth quarter of 2008 during the financial crisis.

In this regard, Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki said, "The reason why the real GDP growth rate in the second quarter of this year was lower than expected is due to the external sector shock being greater than anticipated despite a rebound in domestic demand." He added, "If the current COVID-19 calming trend continues, the second quarter will be the bottom, and a significant rebound is possible in the third quarter."

However, it is difficult to escape from sluggish exports, so there are not many factors for an economic rebound in the second half of the year. In particular, exports of key items such as automobiles, auto parts, and petroleum products have sharply decreased, and the export slowdown is expected to deepen further.

Kim Ki-heung, Professor Emeritus of Economics at Kyonggi University, said, "The economic recovery model will appear as a gentle U-shape rather than a V-shape." Professor Jeong In-kyo of Inha University’s Department of International Trade said, "Domestic consumption needs to increase significantly compared to last year for the growth rate to rise, but exports have an immediate effect on GDP growth," and added, "The government should support exports through non-face-to-face methods."

Meanwhile, the annual growth rate is also expected to fall far below the Bank of Korea’s initial forecast (-0.2%). The market analysis suggests that the Bank of Korea’s May prediction of a worst-case scenario with COVID-19 not calming down, where the growth rate would fall to the -2% range, is gradually becoming closer to reality.

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