Unprecedented Economic Downturn Forecast This Year
11 April, 2020
The Korea Economic Analysis Institute forecasts that the country's economy will shrink an impressive 2.3 percent this season. This is the first-time a state-manage think tank here provides forecast negative progress for the economy.
The only times in modern history that Korea's economy shrank was in 1980 (-1.6 percent) during the second essential oil shock and in 1998 (-5.1 percent) during the Asian financial crisis.
Late this past year, KERI even now expected the economic system to grow 1.9 percent this season. The about-turn is based on KERI's projection of commercial output and private intake screeching to a halt due to the coronavirus epidemic while other key economies like China, Japan and the U.S. are expected to experience sharp economic downturns.
KERI speculates that each percentage-point drop in expansion results in the quantity of low-income earners growing by 190,000. When the economy shrinks 2.3 percent, GDP declines by W42.4 trillion and the number of unemployed persons rises by 254,000.
It also forecast that private consumption will shrink 3.7 percent, while exports will also drop 2.2 percent.
A street in the buying hub of Myeong-dong in Seoul is deserted in Wednesday.
Businesses expect to manage to endure the effects of the epidemic for typically 4.9 months before they must shut down.
Job search portal Saramin polled 366 blue-chip companies and 92.8 percent said they'll be pushed beyond the limit if the epidemic continues for a lot more than five months. Fifty-seven percent said they will be able to last only 90 days.
Global economic research institutes, credit rating agencies and investment banks are all slashing their growth forecasts for Korea this year.
Nomura Securities recently revised its outlook to -6.7 percent, Morgan Stanley to -1 percent, UBS to -0.9 percent, Regular Chartered to -0.6 percent and Fitch to -0.2 percent.
Foreign businesses listed below are also reeling. In a study by the Korean German Chamber of Commerce and Industry 33 percent of member companies said business circumstances are "deteriorating," while 50 percent viewed another 12 months as tricky and 80 percent predicted the conditions to previous for some time.
Twenty percent of customers said they haven't any investment plans for the next 12 months, while 41 percent said they intended to lessen investments.
Cho Kyung-yup at the KERI said, "Private consumption and exports, that have been the two pillars assisting our feeble financial system, are both expected to shrink. We must fill up on resources."
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