For the first time in 17 years, Korea has entered a recession due to the ongoing health and economic crises caused by COVID-19. Trade is a crucial component of the Korean economy, with exports accounting for almost 40%. As such, the 16.6% decline in export demand was a major contributing factor to GDP contracting 3.3% in the second quarter. This also represents the sharpest drop in demand since 1963.
Finance Minister Hong Nam-ki expects that the government’s third supplementary budget of ₩35.1 trillion (A$40 billion) will help “economic recovery in the later half of the year” through wage subsidies, discount coupons to increase consumer spending and business loans. Furthermore, the ₩160 trillion (A$186.7 billion) Korean New Deal, which aims to create 1.9 million jobs by 2025 and stimulate innovation in digital and green technologies, will begin to have an effect in the third quarter of 2020. Park Sang-hyun, an analyst at HI Investment & Securities, said “the worst seems to be over. The base effect and fiscal injection from supplementary budget will improve investment.”
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