COVID saw the South Korean economy hit a 20-year low in 2020 with GDP contracting by 1% as the economy lost steam in the 4th quarter amid a resurgence of coronavirus infections and lockdowns.
GDP slowed to a 1.1% quarter on quarter rate in the three months to December, down sharply from the 2.1% rate reported for the September quarter.
The estimate was stronger than expected and the economy is forecast to rebound sharply this year, as long as COVID retreats and the vaccinations work.
South Korea is one of Australia’s top five export destinations with products dominated by iron ore, copper, coal and meat and some grains.
The early GDP report from South Korea is one of a number due this week around the world – the United States, Germany and France are due to release their preliminary reports.
The preliminary Bank of Korea data on Tuesday said the 1% contraction over 2020 as a whole was the weakest annual performance since 1998 when the Asian financial crisis was at its peak.
Though the 1.1% rate was much better than the 0.6% growth forecast from the market, it confirms that the new wave of Covid-19 cases challenged— but did not derail—the export-driven recovery seen in the three months to September.
Stricter social distancing and other controls are in place to help curb the pandemic and like so many other economies have seen in 2020, that curbs business activity and crimps consumer spending.
The GDP reported confirmed the latter with a sharp 1.7% fall in private consumption in the fourth quarter that a 12.6% rise in exports in December could not quite full offset. Exports for the quarter were up 5.2%
Higher demand for semiconductors (now in short supply globally, especially for the auto industry) and petrochemicals accounted for much of the rise in exports.
Year-on-year, the economy shrank 1.4% in the fourth quarter following a 1.1% contraction in the previous quarter.
The central bank expects the economy to expand 3.0% in 2021, but like everywhere else, that will need vaccinations to work and a sharp fall in COVID infections that is sustained for months and months.