South Korea’s Economy and Sharpest Recession in Years

South Korea has one of the largest economies in Asia and around the world. Moreover, the country is a member of the G20. This fact once more underlines the importance of the local economy. Unfortunately, the coronavirus pandemic caused significant damage to the country’s economy. Moreover, pandemic created a lot of pressure on companies around the world. 

It is worth noting that, South Korea’s economy returned to growth in the third quarter. The economy recovered from its sharpest contraction in more than 10 years. Importantly, the economy recovered thanks to stimulus measures. Moreover, its biggest trading partners eased coronavirus restrictions and this factor also helped to boost the economy. 

Based on the information provided by the Bank of Korea (BOK), the economy grew by a seasonally adjusted 1.9% in the September quarter compared with the April-to-June period. It was the fastest expansion since the first quarter of 2020. Importantly, that reverses a 3.2% decline in the second quarter. People should take into account that, it was the worst result since 2008. 

Interestingly, analysts expected the country’s economy to grow by 1.7% in the third quarter. Nonetheless, the result surpassed expectations. 

Importantly, on a year-on-year basis, the economy shrank by 1.3% in the third quarter, after declining by a revised 2.7% in the second quarter. 

Stimulus measures and local economy

As stated above, the country’s government helped to boost the economy. Importantly, a late summer resurgence of the virus in South Korea, that led to tighter social distancing rules has eased. Moreover, the government resumed the distribution of discount coupons, halted during the second wave. It is not surprising that the government continues to distribute coupons, and the government is promoting an annual spending event in early November to boost the recovery.

The Bank of Korea reduced interest rates to a record low of 0.5%. The country’s central bank expects a 1.3% contraction for the year, potentially South Korea’s biggest contraction in more than 20 years. 

It is worth mentioning that, in September the government began rolling out the final of four extra budgets to inject a total of about 310 trillion South Korean won $275 billion of fiscal stimulus. 

Exports jumped 15.6% in the third quarter compared to the previous three months, rebounding at the fastest pace since 1986. Hopefully, the country recovered from its sharpest contraction in more than a decade. South Korea in cooperation with other countries has the potential to minimize the damage caused by the pandemic in the region.