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Shipping containers awaiting export at Busan Port. (Yonhap News)

In 2020, South Korea recorded its first negative growth since the 1997 Asian financial crisis amid the COVID-19 pandemic. At the same time, it bounced back with two consecutive quarters of growth, registering 1.1% in Q4 after its 2.1% growth in Q3.

On Jan. 26, the Bank of Korea (BOK) announced that the real gross domestic product (GDP) growth rate for 2020 had been calculated at -1.0% (advance estimate). This marked the third instance of negative annual growth in South Korean history. The first was in 1980 (-1.6%) due to the 1979 oil crisis; the second was in 1998 (-5.1%) in the aftermath of the Asian financial crisis.

The figure was heavily affected by declines in private consumption and exports last year amid the impact of the COVID-19 pandemic. Private consumption fell by 5%, the largest such drop since the 11.9% decline in 1998. Exports were down by 2.5% – their first decrease in 11 years since 2009 (-0.5%) – as they failed to recover from a drop-off during the first half of the year.

In terms of economic factors contributing to growth, the government sector’s contribution was calculated at 1 percentage point, compared with -2.0 percentage points for the private sector. In other words, while the government shored up the growth rate by one percentage point through its expansionary fiscal policies and increased expenditures, this was not enough to bridge the enormous gap and prevent negative growth as the private sector stagnated.

This was also evident in the steep declines in expenditures for the wholesale/retail sales and hospitality/restaurant industries and transportation industry, which respectively fell by 5.8% and 15.9% as they bore the brunt of the pandemic’s damage.

In Q4 2020, the GDP rose by 1.1% from the previous quarter. This fell below the Q3 2020 growth rate of 2.1%, but still indicated a mild recovery from the shock of the first half of the year. Exports increased by 5.2%, especially in semiconductors and chemical products. This offset the decline in domestic demand, including a decrease of 1.7% in private consumption.

By Han Gwang-deok, finance correspondent

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