"Recovery to Pre-COVID-19 Economic Levels Expected Around Second Half of Next Year"

Hyundai Research Institute Forecasts Six Major Domestic Economic Issues for Next Year

[Asia Economy Reporter Kim Hyewon] It is forecasted that the economy will recover to the pre-COVID-19 level around the second half of next year. Amid repeated cycles of COVID-19 resurgence and temporary stabilization, a gradual U-shaped economic rebound is expected, supported by the Korean New Deal and strong semiconductor exports.

On the 4th, Hyundai Research Institute released the '2021 Domestic Economic Issues' report, stating, "The Korean economy is currently in a phase of confirming the economic bottom," and "The timing to reach the pre-COVID-19 economic situation is expected to be around the second half of next year." It forecasts a very gradual 'asymmetric U-shaped' recovery curve for the domestic economy.

Hyundai Research Institute predicted, "There is a high possibility that the resurgence and temporary stabilization of COVID-19 will repeat going forward," and "Domestic demand will show a flow of small waves repeating around a certain economic trend line."

Regarding domestic economic issues for next year, the report pointed to the recently abundant liquidity supply, stating, "Considering the domestic economic outlook, the 'inverse relationship' where an increase in money supply does not lead to a rise in inflation rate is expected to persist for the time being." It also noted that while the recently expanded liquidity prevents excessive contraction of the real economy such as companies and households, it raises asset prices and poses a risk of increasing financial imbalances.

Employment and consumption 'simultaneous polarization' is also a concern. Hyundai Research Institute expressed worries that employment polarization by status and age caused by COVID-19 this year will continue next year, and that employment polarization could lead to consumption polarization. However, with the activation of the non-face-to-face economy due to COVID-19, exports related to computers, semiconductors, and home appliances are expected to remain strong next year.

The Korean New Deal is analyzed as the key to economic recovery. Hyundai Research Institute stated, "The Korean New Deal policy is expected to play a savior role in revitalizing the economy," and "The execution rate of investments in 2021 and whether private sector seed investments occur are expected to be the main factors determining the future economic direction." It added, "If regulations and business environment improvements for new business creation and private investment activation are sluggish, they could act as obstacles."

Based on this analysis, Hyundai Research Institute advised the government to continue efforts to support the survival of economic agents and enhance the vitality of the private economy. Hong Junpyo, Research Fellow of the Trend Analysis Team at Hyundai Research Institute, emphasized, "While preventing excessive contraction of the real economy through accommodative monetary policy, policy efforts to manage household and corporate debt at appropriate levels are necessary," and "Efforts should focus on mitigating labor market shocks and expanding household consumption capacity to prevent labor market sluggishness caused by COVID-19 resurgence from leading to consumption sluggishness." He added, "In addition to government efforts to boost export vitality, companies need to enhance export competitiveness by developing export items reflecting changing trends."

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