[Economic Outlook] Q2 Growth Rate Decline... Next Year's Budget Proposal Also Announced

[Asia Economy Reporter Kim Eun-byeol] This week, the preliminary results of the second quarter economic growth rate and the July industrial activity trend statistics will be announced. These are indicators that specifically show the impact of the novel coronavirus infection (COVID-19).

According to the Bank of Korea on the 30th, the Bank will release the preliminary results of the second quarter national income statistics on the 1st of next month.

The flash estimate of the second quarter real Gross Domestic Product (GDP) growth rate, announced earlier on the 23rd of last month, was -3.3% (compared to the previous quarter). This marks two consecutive quarters of negative growth following the first quarter (-1.3%), and it is the lowest in 22 years and 3 months since the first quarter of 1998 (-6.8%) during the foreign exchange crisis. Compared to the second quarter of last year, it also contracted by -2.9%. This is the worst performance in 21 years and 6 months since the fourth quarter of 1998 (-3.8%).

Attention is focused on whether the preliminary growth rate results for the second quarter, which fully reflect the June industrial activity trends, will be worse than the flash estimate or show some improvement.

On the same day, the government will announce the budget plan for next year. There are expectations that a 'super budget' exceeding 550 trillion won will be prepared to recover the sluggish economy following the COVID-19 crisis. It is anticipated that the highest priority will be given to allocating resources for economic response. Since negative growth this year is virtually certain, various support measures targeting vulnerable groups are also expected. Budget allocation for the Korean New Deal project will also begin next year.

Earlier, on the 31st of this month, Statistics Korea will announce the July industrial activity trends. This is an indicator to check how much the economy in July, the first month of the third quarter, has bottomed out.

The June industrial activity trends showed positive signals with improvements in the three major sectors: production, consumption, and investment.

However, since industrial activity trends are month-on-month indicators, if the previous month's indicators improve significantly, the improvement rate for the following month may decrease or even turn negative, so optimism is not guaranteed.

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