Meaningful recovery in the Korean economy after a contraction this year would depend on how much demand at home and overseas is restored after the pandemic ruins, said heads of top economic think tanks in Korea.
Korea Economic Research Institute (KERI) President Kwon Tae-shin, LG Economic Research Institute President Kim Young-min, Korea Chamber of Commerce and Industry’s Sustainable Growth Initiative head Lim Jin and Korea Institute of Finance President Sohn Sang-ho all pointed to the depressed sentiment as the result of the lengthening in virus crisis as the biggest worry about the economy during a telephone interview with Maeil Business Newspaper on Monday.
The relief funds mostly fueled the fluid money into asset market, helping less to boost output and income, Sohn noted.
Bank of Korea suggested that 86.7 percent of service industry including wholesale and retail, hospitality and restaurant businesses will be faring worse as consumers are rapidly turning to online shops. The central bank also found that 58.2 percent of the industry faces job insecurity and the workforce would shrink by 10 percent to 30 percent over the next two years.
KERI recently revised down its outlook on private consumption growth to negative 4.1 percent from negative 3.7 percent as it expected the ongoing social distancing measures and poor business performance to continue to weigh on spending.
The overall weakness in demand in the global market could pose a great threat to the export-driven Korean economy, according to Kim. “Demand in the global economy is stagnant as individuals and businesses alike increase savings and reduce debts,” he said.
The economic growth would turn positive next year due to the base effect from a negative growth this year, but won’t be a meaningful recovery, he said.
Kwon named regulatory excess as the biggest stumbling block to recovery. The government and ruling party have only toughened regulations on companies and dampened sentiment to invest and hire. “It doesn’t make any sense why the anti-business bills are being pushed when corporate sentiment is so weak,” he said.
Sohn and Lim agreed that regulations will only harden times for the Korean Inc.
By Kim Jung-hwan, Song Min-geun, Kim Hyung-joo and Choi Mira
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]