Korea Economic Forecast

Korea Economic Outlook

August 25, 2020

Preliminary data revealed the economy contracted markedly in Q2 as Covid-19 took its toll. Investment lost steam as the pandemic sowed uncertainty, while exports of goods and services plunged as external demand weakened against the backdrop of lockdowns enacted globally. However, private consumption rebounded somewhat from Q1’s contraction, partly cushioning the downturn. More recently, exports plunged in the first half of the third quarter when compared to last year, on weaker demand from China and Vietnam. That said, unemployment edged down in July and business confidence rose in August, pointing to a slow economic recovery thus far in Q3. Less positively, the government imposed new restrictions to limit gatherings in the capital area due to a resurgence in Covid-19 cases in August. While this is unlikely to derail the recovery, the possibility of further measures poses a threat.

Korea Economic Growth

The economy is expected to contract this year as Covid-19 bites both domestic and external demand. Nevertheless, an accommodative monetary policy stance and comprehensive fiscal stimulus should support activity somewhat. Potential prolonged weakness in external demand and further social distancing measures pose downside risks. FocusEconomics sees a contraction in the economy of 0.9% in 2020, which is down 0.1 percentage points from last month’s forecast, before growth of 3.2% in 2021.

Korea Economy Data

2015 2016 2017 2018 2019
Population (million)
GDP per capita (USD)28,72329,27331,55533,39131,731
GDP (USD bn)1,4651,5001,6241,7251,646
Economic Growth (GDP, annual variation in %)
Consumption (annual variation in %)
Investment (annual variation in %)
Industrial Production (annual variation in %)-
Retail Sales (annual variation in %)
Unemployment Rate3.
Fiscal Balance (% of GDP)
Public Debt (% of GDP)37.337.636.737.940.7
Money (annual variation in %)
Inflation Rate (CPI, annual variation in %, eop)
Inflation Rate (CPI, annual variation in %)
Inflation (PPI, annual variation in %)-4.0-
Policy Interest Rate (%)1.501.251.501.751.25
Stock Market (annual variation in %)2.43.321.8-17.37.7
Exchange Rate (vs USD, aop)1,1321,1601,1311,1001,166
Exchange Rate (vs USD)1,1731,2081,0711,1161,156
Current Account (% of GDP)
Current Account Balance (USD bn)10597.975.277.560.0
Trade Balance (USD billion)90.389.295.269.738.9
Exports (USD billion)527495574605542
Imports (USD billion)436406478535503
Exports (annual variation in %)-8.0-5.915.85.4-10.4
Imports (annual variation in %)-16.9-6.917.811.9-6.0
International Reserves (USD)368371389404409
External Debt (% of GDP)27.025.525.425.628.4

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Korea Facts

Value Change Date
Bond Yield1.681.55 %Dec 31
Exchange Rate1,1560.21 %Dec 31

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