Hyundai Economic Research Institute "If COVID-19 spreads to pandemic level, possibility of second economic shock"

"Due to psychological resilience, even if another economic shock occurs, its intensity is expected to be lower than the first wave"

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[Asia Economy Reporter Yoo Je-hoon] An analysis has emerged that if the ongoing third wave of the novel coronavirus infection (COVID-19) spreads to a pandemic level, a second economic shock caused by COVID-19 will be inevitable.

On the 6th, the Hyundai Research Institute released its economic weekly report titled "Preparing for the Second COVID-19 Economic Shockwave," stating, "Although the economic growth rate has bottomed out in the second quarter and continued to rebound in the third quarter, and both leading and coincident economic indices are maintaining an upward trend, it remains uncertain whether the Korean economy will settle into a recovery phase after the fourth quarter due to the recent resurgence of COVID-19."

The Hyundai Research Institute first pointed out that if the damage from this third wave spreads, it could prolong the slump in private consumption. In fact, during the first economic shock period in February to March (first quarter), the private consumption growth rate fell as much as -4.8%.

However, even if a second economic shock period arrives, its intensity is expected to be relatively lower compared to the first economic shock period. The Hyundai Research Institute noted, "If the third wave follows the worst-case scenario, private consumption may fall into a slump once again. However, even in this case, due to strengthened psychological resilience of economic agents and the base effect of a prolonged recession, the intensity of the slump is expected to be lower than that of the first quarter."

The international COVID-19 pandemic is also expected to impact export conditions. Next year, the domestic export growth rate is expected to rise significantly to 10.1% compared to this year’s -6%, but if COVID-19 resurges during the winter season, it could decrease somewhat to around 6.0%, according to the analysis.

The Hyundai Research Institute stated, "While COVID-19 prevention must be prioritized, various attempts to minimize economic vitality loss are required," adding, "Comprehensive trade policies that can respond to rapid global economic fluctuations while enhancing medium- to long-term export competitiveness must also be prepared."

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