[2021 Economic Policy] This Year's Growth Rate Forecasted at -1.1%... Negative Growth for the First Time in 22 Years Due to COVID-19

[Asia Economy Reporter Kwangho Lee] The government has projected the real Gross Domestic Product (GDP) growth rate for this year at -1.1%. South Korea's economy has experienced negative growth only twice before: in 1980 (-1.6%) and 1998 (-5.1%). If this year's growth rate is confirmed negative, it will mark the first year of negative growth in 22 years since the Asian financial crisis.

The '2021 Economic Policy Direction' announced by the government on the 17th included this economic outlook.

The government expects -1.1% growth this year due to the unprecedented global pandemic causing severe contraction in domestic and international economic activities.

Although exports have recently shown signs of improvement, private consumption has contracted due to repeated strengthening of social distancing measures amid the spread of COVID-19.

However, it added that through bold policy responses such as expansionary macroeconomic policies, the government has buffered the economic shock and minimized economic damage compared to major countries.

The government prepared an initial budget of 512.3 trillion won this year, plus four supplementary budgets totaling 67 trillion won. To maximize the effect of expansionary fiscal policy, the initial budget was executed early at a record high level, and the supplementary budget was promptly executed immediately after passing the National Assembly.

In addition, fiscal spending contributed to growth enhancement both directly and indirectly through various channels, while also improving distribution by supporting vulnerable groups.

A government official said, "This year's expansionary fiscal policy faithfully served as a buffer against the economic shock caused by the COVID-19 crisis and as a support for vulnerable groups."

He added, "Considering uncertainties related to COVID-19 next year as well, it is necessary to lead the rebound of our economy and the leap to a leading economy through expansionary fiscal policy. We will actively promote early execution of fiscal budgets, focusing on job creation budgets, and actively support the Korean New Deal, a development strategy for becoming a leading nation."

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