South Korean saw its GDP contract 1.4% in the first quarter of 2020 from the previous quarter at the end of 2019, when it had grown 1.3%.
The Bank of Korea said the pandemic had hammered industrial output, domestic spending and jobs, the Yonhap news agency reported. The Q1 2020 figure was the sharpest quarter-on-quarter contraction since the fourth quarter of 2008, when, amid the global financial crisis, the economy fell 3.3%.
However, the South Korean economy still registered year-on-year growth of 1.3% – although that figure was the lowest year-on-year number since the third quarter of 2009.
On quarter, Q1 exports fell 2% due to decreased shipments of capital goods, chemicals and autos, although semiconductor exports rose, according to BOK data. Imports fell 4.1%, while domestic consumption plunged 6.4%.
Semiconductors suffered a long cyclical downturn in 2019, but appear to be exiting that, while also benefiting from demand for DRAM chips for servers, as online businesses ramp up capacity amid the pandemic lockdowns.
South Korea’s quarterly figures are one of the earliest signs of the virus’ impact on a major, trade-based economy. The G11 nation is home to leading players in the semiconductors, display, consumer electronics, autos, shipbuilding and petrochemical sectors and its economy is 70% dependent on trade, making the nation a global weathervane.
Worse is likely to come. Finance Minister Hong Nam-ki said the hits to exports and jobs were likely to worsen in Q2, Yonhap reported. The nation lost 195,000 jobs last month.
The country did not suffer a major outbreak until the end of February, while the pandemic did not heavily impact either the EU or the United States until mid-way through the quarter.
After GDP growth of 2% in 2019 – South Korea’s lowest annual rate in a decade – this year, Korea is expected by many market watchers to suffer its first recession since the Asian financial crisis of 1998.
The BOK – customarily optimistic – expects growth of 2.1% and the Asia Development Bank forecasts 1.2%.
But most outlooks are negative. The IMF expects the South Korean economy to contract -1.2% this year and Standard and Poors forecast -1.5%. Consultancy Capital Economics has -1%, while a consensus estimate of 11 investment banks in the first week of April anticipates -0.9%.