Professor Jo Dong-cheol: "Low Possibility of COVID Double Dip... Structural Flexibility Needed"

Professor Jo Dong-cheol of KDI Graduate School of International Policy Studies' Online Lecture on 'COVID-19 Shock and Economic Outlook Scenarios' Hosted by the Korea Chamber of Commerce and Industry

Professor Jo Dong-chul, KDI

[Asia Economy Reporter Changhwan Lee] Although the global economy is experiencing a recession due to the novel coronavirus disease (COVID-19), the possibility of a double-dip recession is considered low.

The Korea Chamber of Commerce and Industry (KCCI) announced that it will hold an online lecture of the ‘KCCI Management Concert’ on the 16th, inviting Professor Dongchul Cho from the KDI Graduate School of International Policy, a leading expert in macroeconomics, under the theme of ‘COVID-19 Shock and Economic Outlook Scenarios.’

Professor Cho stated, “Although we are undergoing an extremely unusual recession triggered by an external economic shock, it appears that the global economy has already passed its bottom,” and predicted, “The speed of economic recovery by country will vary depending on the structural flexibility of their economic systems.”

He added, “Looking at indicators such as the global economic leading index and the manufacturing sentiment index, it is highly likely that the bottom was passed in the second quarter,” and forecasted, “Even if COVID-19 spreads again, the social systems are somewhat prepared to respond, so the possibility of a double-dip recession is low.”

Regarding the speed of economic recovery, he said, “Considering that it is difficult for the COVID-19 situation to end early, the recovery speed next year is expected to be gradual, and the key issue will be how much time it takes to return to the pre-crisis state.”

Professor Cho noted, “Looking at the 2008 global financial crisis, the United States showed a much faster economic recovery speed, or resilience, than Europe,” and explained, “This is because the U.S. has structural flexibility that allows it to quickly adapt to crises.”

However, he expressed a negative view on whether the growth trend before the crisis can be fully restored during the post-pandemic period. “Countries that experienced the past Asian financial crisis, Latin American debt crisis, and global financial crisis did not fully recover their pre-crisis trends due to decreased economic structural flexibility,” he said, adding, “Although it is uncertain how long the recovery period will take this time, it is not entirely optimistic.”

South Korea’s Economic Resilience Weakened by Various Regulations... Annual Growth Rate May Fall Below 2% Over the Next Five Years

Regarding the Korean economy after COVID-19, he said, “Thanks to an advanced medical system, our economy has performed relatively well,” and added, “The Bank of Korea forecasts this year’s economic growth rate at -1.3%, and considering technical rebound factors, growth close to 3% is expected next year.”

On the consumption sector, he said, “The biggest feature of this COVID-19 recession is a consumption-type recession caused by global lockdowns,” and predicted, “Consumption this year is almost -4%, and even if it recovers next year, it will likely only make up for what was lost this year.”

Professor Cho assessed that the Korean economy’s resilience needed to overcome the COVID-19 shock has weakened. He diagnosed, “The flexibility for smooth resource (labor, capital) movement between thriving industries like ICT and struggling traditional manufacturing industries such as steel and shipbuilding is declining,” and evaluated, “Labor market and housing market regulations strengthened in recent years are also placing a heavy burden on industrial adaptability due to the activation of non-face-to-face industries and telecommuting.”

Finally, he predicted, “South Korea’s annual average growth rate was 8.6% in the 1980s, 6.4% in the 1990s, and 4.5% in the 2000s, decreasing by about 2% every decade,” and added, “From 2011 to 2020, it is expected to be around 2.5%, and over the next five years, it may decline further to below 2%.”

The ‘KCCI Management Concert’ is an event where experts share opinions on strategic implications such as management strategies, management trends, and international affairs necessary for companies. Since its launch in 2014, it has been held as a web seminar format since April this year due to COVID-19. Professor Cho’s lecture on this day can be viewed on YouTube and the KCCI website’s ‘Online Seminar’ section.

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