Korea's 2Q Shrinks 3.3% but Ranks 2nd Among 14 Countries... Holds Up Well Despite COVID-19

[Sejong=Asia Economy Reporter Kim Hyunjung] Despite South Korea's economic growth rate plunging to -3.3% in the second quarter of this year due to the impact of the novel coronavirus infection (COVID-19), it was the second highest among the 14 countries that have announced their Q2 growth rates so far. Despite a sharp decline in exports and sluggish domestic demand caused by COVID-19, South Korea is considered to have 'held up relatively well' compared to other countries.

According to the Organisation for Economic Co-operation and Development (OECD) on the 2nd, South Korea's Q2 growth rate was the second highest among 14 countries, including 13 OECD member countries that announced real Gross Domestic Product (GDP) and non-member China. China ranked first with 11.5% growth in Q2.

The OECD compiles growth rates for its 36 member countries. Six major emerging countries?China, Russia, India, Indonesia, Brazil, and South Africa?are not members but are included in the compilation and announcement.

South Korea lagged behind China but had a smaller decline than the United States (-9.5%), Germany (-10.1%), France (-13.8%), Italy (-12.4%), and Spain (-18.5%). The average Q2 growth rate of the 14 countries that recently announced growth rates was -9.6%.

The government also expressed concern about the negative growth in Q2 but self-assessed that the decline was relatively smaller in the global market. On the 1st, Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki said, "Although simple comparisons are difficult, judging by the absolute value of GDP decline, South Korea minimized the damage from this crisis to about 20-30% of other countries," and evaluated that "South Korea's GDP decline is much smaller compared to other countries."

Signs of improvement are detected in economic indicators. On the 31st of last month, Statistics Korea announced that production, consumption, and investment in June achieved a 'triple rebound' for the first time in five months since December 2019. Total industrial production in June increased by 4.2% compared to the previous month, retail sales rose by 2.4%, and facility investment grew by 5.4%. Industrial production increased by 7.2% month-on-month as mining, manufacturing, and electricity & gas sectors all rose. This is the largest increase in 11 years and 4 months since February 2009 (7.3%) during the global financial crisis.

In particular, manufacturing production increased by 7.4% month-on-month despite a 1.1% decrease in primary metals, driven by increases in automobiles (22.9%) and semiconductors (3.8%). Manufacturing shipments rose by 8.4% month-on-month, with increases in automobiles and chemical products. Export shipments increased by 9.8%, marking the largest growth in 32 years and 9 months since September 1987 (19.2%).

The retail sales index rose by 2.4% month-on-month, with sales of durable goods such as passenger cars (4.1%), semi-durable goods such as clothing (4.7%), and non-durable goods such as cosmetics (0.4%) all increasing. Facility investment increased by 5.4% month-on-month, with investments in machinery such as precision instruments (4.7%) and transportation equipment such as automobiles (7.2%) both rising. Construction performance (constant prices) increased by 0.4% month-on-month, as building construction (0.7%) rose despite a decrease in civil engineering (-0.3%). The coincident index of economic conditions, which shows the current economic situation, and the leading index, which forecasts future economic phases, both rose by 0.2 points and 0.4 points respectively, marking a simultaneous increase for the first time in five months.

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