Will the Economy Improve After Seollal?

Psychological Inhibitors Are Widespread
Impact of Omicron Must Decrease

Reference photo_Pyeongtaek Port container. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Junho Hwang] An analysis has been raised that the spread of COVID-19 Omicron, expanded supply chain disruptions, and monetary policy normalization due to inflationary pressures in the U.S. could cause the economy to stall after the Lunar New Year. On the 30th, Ha Geon-hyeong, a researcher at Shinhan Financial Investment, revealed this through an economic analysis report titled "Lessons from the 1994 Tightening," which included an analysis of South Korea's economy.

At the beginning of the year, domestic and international economies are showing differentiated patterns. Due to the spread of Omicron, new confirmed cases surged to around 10,000. The government extended quarantine measures, resulting in a downward trend in consumer activities. On the other hand, exports until the 20th of this month increased by 22% compared to the same period last year, showing a strong growth rate. Amid persistent price pressures on energy and other items, demand inflows from China also contributed.

However, the leading index has not emerged from a six-month consecutive slowdown phase. Due to increased domestic and international uncertainties and economic concerns, both financial and real indicators have deteriorated. Consumption has also failed to exit the slowdown phase. This is due to the overall contraction in consumer sentiment following the withdrawal of the "With Corona" policy in December last year. Due to social distancing measures, sales of semi-durable goods such as shoes, bags, and clothing were sluggish.

The somewhat fortunate aspect is that despite the spread of Omicron, the fatality rate is stabilizing downward. The booster shot vaccination rate is also steadily increasing. This is expected to reduce the possibility of further contraction in consumer activities. The Google Mobility Index has also shown signs of rebound since the end of January.

Researcher Ha said, "Production disruptions have been confirmed due to strict lockdowns in some areas such as Xi'an, China, and the demand inflow in preparation for the decline in operating rates during the Beijing Olympics is coming to an end," adding, "In advanced countries such as the U.S., psychological contraction due to expanded inflationary pressures and early monetary policy normalization is also expected to constrain demand."

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