South Korea plunged into recession in the second quarter in its worst economic decline in more than two decades as the coronavirus pandemic battered exports and social distancing curbs paralyzed factories.
Asia’s fourth-largest economy shrank by a seasonally adjusted 3.3 percent in the June quarter from three months earlier, the Bank of Korea said on Thursday. That is the sharpest contraction since the first quarter of 1998 and steeper than a 2.3 percent fall seen in a Reuters poll. South Korea joins Japan, Thailand and Singapore in technical recession, as the pandemic slams Asia’s trade-reliant economies.
However, analysts and policymakers are looking at the prospect of a recovery. “It’s possible for us to see China-style rebound in the third quarter as the pandemic slows and activity in overseas production, schools and hospitals resume,” South Korean finance minister Hong Nam-ki said after the data was released.
South Korea’s gross domestic product fell 2.9 percent in year-on-year terms, the biggest fall since the fourth quarter of 1998 and worse than a 2.0 percent decline seen in the poll.
Exports were the biggest drag on growth, dropping by 16.6 percent on-quarter to mark the worst reading since 1963. South Korea’s POSCO, the world’s fifth-biggest steelmaker, reported an 84.3 percent drop in operating profit in the second quarter. On Thursday, the world’s No.2 memory chip maker SK Hynix warned of uncertainty in the second half.
“While consumer spending should gradually recover, the threat from the virus is unlikely to fade entirely and some social distancing will probably have to remain in place,” Capital Economics Asia Economist Alex Holmes said.
A health official wearing protective gear sprays disinfectant in a cafeteria at a high school in Seoul, South Korea on Monday as schools are set to reopen starting this week. Photo: AFP
