Report warns of possible ‘deepening contraction’

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Report warns of possible ‘deepening contraction’

The Korean economy is showing signs of a “deepening contraction” as the coronavirus pandemic and lockdown measures have halted global businesses and ravaged consumer demand, a state-run think tank said Thursday.

Korea’s overall industrial output suffered its greatest one-month contraction in nine years in February, as the economic fallout from the coronavirus affected manufacturing activity and domestic spending, the Korea Development Institute (KDI) said in its Monthly Economic Trends report.

The 3.5 percent on-month drop in February marked the sharpest decline since February 2011, when output dipped 3.7 percent.

“Manufacturing production and the capacity utilization rate decreased on disruptions in the supply of automobile parts from China,” the report stated. “But, the decline in exports eased in March, led by automobiles and semiconductors.”

Korea’s exports fell 0.2 percent in March from a year earlier in the face of the growing economic fallout from the coronavirus pandemic.

In the first 10 days of April, however, the nation’s exports tumbled 18.6 percent on year.

“Given the soaring number of confirmed Covid-19 cases in Europe and the United States since March, the impact from the decreasing overseas demand will grow,” the KDI said.

Earlier this week, the IMF predicted that Korea’s economy would shrink 1.2 percent this year as the global economy is expected to hit its worst year since the Great Depression of the 1930s over the pandemic.

The IMF expects the world economy to contract 3 percent this year.

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