Third wave of Covid worsened domestic economy: KDI

Economy

Published: 07 Feb. 2021, 15:59

Third wave of Covid worsened domestic economy: KDI

A store in Myeong-dong, central Seoul, is shown vacated on Jan. 29. Many stores in one of the most popular tourism districts were forced to close as the social distancing regulations implemented since late November continue. [YONHAP]

The spike of Covid-19 that escalated in November and continues today has left a major scar on the domestic economy, according to the latest assessment by the state-owned think tank.

The Korea Development Institute (KDI) in its report released on Sunday stated that the “third” wave of Covid-19 has worsened the domestic economy.

Retail in December fell 2 percent year-on-year, an increase from November when it fell 1.5 percent.

The service industry shrunk 2.2 percent compared to 1.4 percent in November.

The dining and hotel industries were particularly hard hit, nosediving nearly 40 percent.

The KDI noted that the situation will be the same for figures in January as the government maintained strict social distancing measures.

According to the state-owned think tank, credit card spending in January shrunk 14.4 percent year-on-year. While the drop eased from December’s 16.2-percent decline, credit card spending has been falling for three consecutive months since November when it fell 4.2 percent.

With the retail and service industry hit hard by Covid-19 social distancing regulations, jobs in these areas were also affected.

In December, 622,000 working in the service industry were no longer employed. That’s nearly triple the size of 287,000 in November.

The number of people who are no longer actively participating in the economy now amounts to 17.2 million, which is the largest number since data first started being compiled in 1999.

The state-owned think tank, however, noted that the economy was holding up largely thanks to exports. The report stated that thanks to improvement in overseas demands, exports and facility investments were up. This contributed to improvement in the manufacturing industry.

Exports last month grew 11.4 percent to $48 billion largely on the back of strong outbound shipments of key export goods in areas like biohealth, mobile telecommunication and semiconductors.

Exports have been growing for three consecutive months since November, which is the first in nearly three years.

Thanks to export growth, the manufacturing industry grew 3.4 percent in December, a sharp increase considering that in November the manufacturing industry grew 0.5 percent.

Semiconductor production was up 18.6 percent. Semiconductors are Korea’s leading export good, accounting for nearly 20 percent of goods exported from Korea.

The average factory operating rate in the manufacturing industry was 74.5 percent, an improvement from November’s 73.9 percent.

Facility investment in December grew 5.3 percent, similar to the previous month at 5.4 percent.

The government projected the economy to increase 3.2 percent this year. Last year, the economy contracted 1 percent, marking the first time since the IMF crisis two decades ago.

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