[Weekly Review] OECD Lowers South Korea Growth Forecast to -1.0%... US and China Upward Revision

Distribution of 500 Digital Traditional Markets... Small Business Payment Fees Reduced to 1% Range
Q2 Corporate Sales Down 10% Year-on-Year

On the 18th, when the number of confirmed cases of the novel coronavirus infection has remained in the 100s for 16 consecutive days, a notice about lease inquiries is posted on a store in Namdaemun Market, Jung-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Jang Sehee] The Organisation for Economic Co-operation and Development (OECD) has downgraded South Korea's growth forecast for this year to -1.0%. In contrast, countries like China and the United States raised their forecasts as the impact of COVID-19 was less severe. The government has decided to reduce payment fees for small business owners to the 1% range to alleviate their difficulties.

◆Second highest growth forecast among G20 member countries= In the mid-term economic outlook report released on the 16th, the OECD projected South Korea's economic growth rate for this year at -1.0%. This is a 0.2 percentage point decrease from the -0.8% forecast made in August. This growth rate ranks first among OECD member countries and second among G20 countries.

On the other hand, China raised its forecast from -2.6% to 1.8%, an increase of 4.4 percentage points. The United States also significantly revised its forecast upward from -7.3% to -3.8%. Regarding this announcement, the Ministry of Economy and Finance stated, "South Korea's growth forecast for this year has been revised upward by 0.2 percentage points compared to June, ranking first among OECD member countries and second among the G20 countries, following China."

The OECD expects the global economy to rebound next year but noted that most countries will find it difficult to recover to pre-crisis levels. Among OECD countries, only Turkey, the United States, and South Korea are expected to recover to pre-crisis levels.

◆500 digital traditional markets to be established... Small business payment fees eased to the 1% range= The government announced plans to establish 500 digital traditional markets equipped with online delivery systems and 100,000 smart stores incorporating robots by 2025.

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, said at the 3rd Korean New Deal Ministerial Meeting and the 16th Central Disaster and Safety Countermeasure Headquarters Meeting on the 17th, "Fundamental support measures to enable small business owners to gain competitiveness suitable for the digital era after COVID-19 are very important tasks."

The government plans to provide customized on-site training for 50,000 digitally vulnerable groups, including middle-aged and older adults, by 2025. Additionally, by 2023, it will establish a 40 billion KRW mutual cooperation fund to distribute 200,000 kiosks and digital payment terminals to small business owners.

Through the establishment of a big data platform for small business owners, the current payment fee burden of 2-4% will be eased to the 1% range. Furthermore, 400 billion KRW in policy funds and 200 billion KRW in special guarantees will be provided to support workplace digitalization, smart equipment purchases, and the promotion of smart technology usage.

◆Corporate sales down 10% year-on-year in Q2= Due to the impact of COVID-19, domestic corporate sales in the second quarter of this year decreased by more than 10% compared to the same period last year. This is the first time since statistics began in the first quarter of 2015 that the sales growth rate has fallen below -10%. This indicates that companies' scale has shrunk due to COVID-19.

According to the "2020 Q2 Corporate Management Analysis" released by the Bank of Korea on the 15th, the year-on-year sales growth rate, which indicates corporate growth, worsened from -1.9% in Q1 to -10.1% in Q2. Manufacturing sales decreased by 12.7% compared to the same period last year, and non-manufacturing sales fell by 6.5%, with both sectors experiencing a larger decline than the previous quarter. A Bank of Korea official explained, "The overall impact of COVID-19 appears to have affected manufacturing due to factors such as falling international oil prices and weak automobile demand."

Regarding stability indicators, the debt ratio fell to 87.0% in Q2 from 88.2% in the previous quarter. Both large enterprises (83.5% → 82.3%) and small and medium enterprises (112.3% → 110.2%) saw decreases.

Meanwhile, the Bank of Korea analyzed these results by sampling 3,862 companies out of 20,914 corporations subject to the External Audit Act as of the end of 2019, excluding unsuitable industries for the survey.

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