Economic Growth Likely to Become Negative
Deflationary concerns are mounting in the South Korean economy as its growth is likely to become negative in the wake of COVID-19 and low prices are becoming permanent.
At present, most economic research institutes as well as the Bank of Korea and the Ministry of Economy and Finance are extremely pessimistic about the Q1 growth of the South Korean economy. According to Bloomberg, the nine economic research institutes and investment banks including Standard Chartered, Barclays, HSBC and HI Investment & Securities recently estimated the economy’s quarter-on-quarter degrowth at 1.5 percent, adding that the economy would show the lowest growth rate in 11 years and three months. Korea Economic Research Institute's degrowth estimate, 2.3 percent, is even more pessimistic.
Besides, the South Korean economy's Q2 growth rate is sure to be much lower than the Q1 figure given when the coronavirus began to spread worldwide. The IMF's 2020 estimate for South Korea is negative 1.2 percent.
In the meantime, the trend of low prices is not disappearing. South Korea's inflation rate was 1.5 percent in January this year and 1.1 percent and 1 percent in the following months. Last month, the inflation in the service sector stood at 0.5 percent. International oil prices are reaching record lows over and over due to sluggish demands and the prices of agricultural products are rising again but insufficient to raise overall consumer prices.