S.Korea’s economy shrinks 2.9% in Q2, worst in 2 decades

South Korea’s economy contracted at a sharper rate than what had been expected in the second quarter, delivering the worst performance in over two decades, as the COVID-19 pandemic has impacted outbound shipments and private spending, official data showed on Thursday.

In the April-June period, the country’s real GDP shrank 2.9 per cent from the same period last year, marking the slowest growth since a 3.8 per cent on-year contraction in the last three months of 1998, Yonhap News Agency reported citing the data from Bank of Korea (BOK).

Exports, which account for nearly 40 per cent of the economy, were the biggest drag as they fell by the most since 1963.

From three months earlier, the local economy also contracted 3.3 per cent, the slowest on-quarter growth since the first quarter of 1998, when it contracted 6.8 per cent.

In the first quarter, the South Korean economy declined 1.3 per cent on-quarter. However, on a on-year basis, the economy expanded 1.4 per cent in the January-March period.

The BOK earlier anticipated the economy to shrink about 2 per cent on-year in the April-June period, placing its annual growth outlook at a contraction of 0.2 percent.

“This was largely caused by a sharp drop in exports with the coronavirus continuing to spread, unlike our expectation that it will likely slow down,” Yonhap News Agency quoted Park Yang-su, head of BOK’s economic statistics office, as saying at a press briefing.

“Exports fell sharply, partly due to economic lockdowns in major import countries,” he added.

But South Korea’s Finance Minister Hong Nam-ki remains optimistic that the economy will recover swiftly, the BBC reported.

“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,” Hong was quoted as saying.

The South Korean government has so far implemented about 277 trillion won ($231 billion) worth of stimulus measures to tackle the effects of the pandemic on its economy.