South Korea reports worst economic performance in over 20 years

South Korea’s economy recorded its worst performance in more than 20 years in the 2nd quarter, the central bank said on Thursday, July 23, as the coronavirus pandemic hammered its exports.

Asia’s 4th largest economy contracted 2.9% year-on-year in the April-June period, the Bank of Korea (BOK) said.

It was the fastest decline since a 3.8% drop in the 4th quarter of 1998, in the aftermath of the Asian financial crisis.

Quarter-on-quarter, it shrank 3.3%, also the worst showing in more than 20 years.

South Korea endured one of the worst early outbreaks of the coronavirus outside mainland China, and while it never imposed a compulsory lockdown, strict social distancing was widely observed from March until it started loosening restrictions in May.

But its economy has been unable to escape the global impact of the pandemic.

The country is highly trade-dependent, and exports plunged 13.6% year-on-year in Q2 – the sharpest decline since 1974, in the wake of the Organization of the Petroleum Exporting Countries oil crisis.

The decline was driven by “decreases in motor vehicles and coal & petroleum products,” the BOK said in a statement.

The BOK forecast in May that the economy will shrink 0.2% in 2020, a dramatic downgrade from its February forecast of 2.1% growth.

But its governor Lee Ju-yeol said last week another downward revision to the prediction was “inevitable,” noting export declines were “deeper than previously expected.”

The International Monetary Fund last month also cut its growth forecast for South Korea, predicting it would shrink 2.1% this year – compared with an average 8% decline for the world’s advanced economies. – Rappler.com