IMF predicts negative growth in 2020

The IMF has projected that Korea will experience negative growth this year, but noted that the country’s rapid response to the coronavirus outbreak will likely blunt the damage compared to other countries’ economies.

The Korean Finance Ministry on Wednesday cited a report by the IMF that forecasted Korea’s economy will decline 1.2 percent compared to the previous year. In January, the organization had expected the Korean economy to grow by 2.2 percent.

Korea’s economy has not suffered a contraction in more than two decades. In 1998, the country’s GDP shrank 5.1 percent in the aftermath of the Asian financial crisis.

But among the 36 Organisation for Economic Cooperation and Development (OECD) member countries, Korea’s adjustment of 3.4 percentage points from January’s IMF forecast was the most limited.

And within the OECD countries, Korea’s projected GDP decline is the smallest. Hungary trailed behind, with a 3.1 percent decline, followed by Chile with a 4.5 percent decline.

“The forecast embodies Korea’s comprehensive approach in containing the Covid-19 outbreak and quick economic policy response, which have helped mitigate the negative impact on domestic activity,” said Andreas Bauer, IMF’s mission chief for Korea.

The IMF is projecting that the global economy will shrink 3 percent in 2020, which would be the sharpest contraction since 1930, during the depths of the Great Depression. The group’s January forecast had expected a 3.3 percent growth rate globally.

The world’s advanced economies are expected to be hit the hardest, with an overall projected decline of 6.1 percent on-year. Emerging markets are expected to shrink 1 percent.

The IMF report noted that except for China, almost all countries’ economic turmoil will be most severe during the second quarter of this year as nations have been forced to lock down their economies to slow the spread of the pandemic.

U.S. economic growth for this year is expected to decline 5.9 percent. The IMF earlier expected U.S. GDP to grow 2 percent, already a decline from the 2.3 percent growth in 2019.

Europe’s economy is expected to fall at a sharper rate of 7.5 percent, compared to the 1.3 percent growth projected in January. Japan is expected to post a 5.2 percent decline, compared to earlier expectations of 0.7 percent growth.

China’s economy this year is expected to grow 1.2 percent, which would be its slowest growth rate in 44 years. The country’s GDP shrank by 1.6 percent in 1976.

But the IMF also expects a strong turnaround in 2021. The global economy is expected to expand 5.8 percent, a faster expansion projected than the 3.4 percent made in January.

Advanced economies are expected to grow 4.5 percent next year, faster than the 1.6 percent projected three months earlier. Emerging economies are expected to grow 6.6 percent, up from 4.6 percent.

Korea’s economy is expected to experience 3.4 percent growth next year.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]