In Case of Full-Scale War Between North and South Korea, South Korea's GDP Drops 37.5%... Global Economy Hit by $4 Trillion

Bloomberg reported on the 28th (local time) that if a full-scale war breaks out between South and North Korea, a recession causing a 3.9% drop in global Gross Domestic Product (GDP) will occur, and the worldwide semiconductor supply chain will be paralyzed.

Bloomberg Economics analyzed that if a full-scale war erupts on the Korean Peninsula, millions of people would die, the global economy would suffer losses amounting to $4 trillion (approximately 5542 trillion won) in the first year of the war, and GDP would decrease by 3.9%. This is more than twice the damage caused by Russia's attack on Ukraine.

원본보기 아이콘

Bloomberg stated, "Like Taiwan, South Korea is a major semiconductor producer, and its economic impact goes beyond the size of its GDP."

The metropolitan area near the capital, within North Korea's missile range, accounts for 81% of South Korea's semiconductor production and 34% of total manufacturing output. If South Korea's electronics exports are halted, a shock to the global economy is inevitable. South Korea produces 4% of the electronic components used in factories worldwide and about 40% of memory semiconductors. For example, Samsung Electronics produces 41% of the world's DRAM and 33% of NAND memory, with major customers including U.S. companies such as Apple, Best Buy, Verizon, Qualcomm, and Microsoft (MS), as well as Germany's Deutsche Telekom and China's Xiaomi.

Furthermore, if war breaks out, the United States and China will respectively side with South Korea and North Korea. Bloomberg predicted that new obstacles to trade between the two major global economic powers will arise, and global markets will plummet.

In this scenario, the GDP of major countries would shrink as follows: South Korea by 37.5%, China by 5%, and the United States by 2.4%. Additionally, Southeast Asia, Japan, and Taiwan would suffer significant damage, resulting in a global GDP decline of 3.9%.

However, Bloomberg assessed the likelihood of a full-scale war between the North and South as a "very low probability." The possibility of the North Korean regime collapsing is considered higher, though still a "low probability." Especially if former President Trump returns to the White House, instability would increase further.

Bloomberg Economics estimated that in the event of the North Korean regime's collapse, South Korea would suffer a GDP hit of 2.5%. China, the United States, and the global GDP would decrease by 0.5%, 0.4%, and 0.5%, respectively.

원본보기 아이콘

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.