Last Year 0.9% Contraction... This Year's Key Issue is 'Consumption Recovery'

This Year, Clear Economic Recovery in Gyeonggi... Active Consideration of 'Domestic Demand Revitalization Measures' in the Second Half

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] Last year, South Korea's gross domestic product (GDP) growth rate recorded a contraction of -0.9%. The gross national income (GNI) per capita also decreased for the second consecutive year, falling to the $31,800 range. This year, while the economy appears to have bottomed out and is showing a gradual rebound, the challenge remains to sustain the recovery in domestic demand.

According to the '2019 National Accounts (Final) and 2020 National Accounts (Preliminary)' statistics released by the Bank of Korea on the 9th, last year's GDP growth rate was -0.9%, which is 0.1 percentage points higher than the preliminary figure announced in March, but it marked the lowest level in 22 years since the 1998 financial crisis (-5.1%).

Last year's GNI per capita was $31,881 in US dollars, down 1.0% from the previous year, marking a decline for the second consecutive year. This was influenced by the won-dollar exchange rate rising by more than 1%. However, in Korean won terms, the GNI per capita was 37.62 million won, an increase of 0.2% compared to the previous year.

In the first quarter of this year, GDP increased by 1.7% compared to the previous quarter. This is 0.1 percentage points higher than the preliminary figure announced in April. As a result, there is an optimistic analysis that the annual growth rate of 4% is within reach.

Exports and investments are rebounding sharply, and there is an analysis that the revived domestic demand flow must be maintained.

In fact, exports from the 1st to the 10th of this month were reported to have increased by 40.9% compared to the same period last year, totaling $17.275 billion (customs clearance basis, preliminary). The export growth trend that continued for seven consecutive months from last November through last month is clearly continuing this month as well. Last month's exports also increased by 45.6% compared to the same month last year, marking the highest growth rate in 32 years.

Consumption, which had sharply declined due to COVID-19, also appears to be recovering. Last month's card approval amount increased by 6.8% compared to the same month last year, showing an increase for four consecutive months. Supported by this, the Consumer Sentiment Index (CSI) in May recorded 105.2, rising 3.0 points from the previous month.

The government is also actively considering measures to sustain the domestic demand flow. Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, previously stated, "In difficult conditions, fiscal policy and exports have been the pillars of the economy," adding, "Now, we must actively review and prepare measures to revitalize domestic demand in the second half economic policy direction so that domestic demand can lead growth and create jobs."

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