[Sejong=Asia Economy Reporter Joo Sang-don] The Korea Development Institute (KDI) recently diagnosed that the Korean economy has experienced intensified economic contraction as the negative shock of the novel coronavirus disease (COVID-19) spread across industries.
On the 7th, KDI announced the 'June Economic Trends' report containing this information.
KDI viewed that the negative impact of COVID-19 is spreading. Last month, it evaluated that "due to the negative effects of COVID-19, consumption and exports decreased, leading to intensified economic contraction." It diagnosed that this shock spread to all industries in June.
KDI stated that due to the contraction of domestic and external demand, total industrial production in April sharply declined, with service industry production continuing a significant decrease, especially in sectors involving frequent face-to-face contact. In fact, total industrial production in April (0.8% → -5.0%) recorded the largest decline since the global financial crisis as growth rates fell across all sectors. Manufacturing shipments recorded a -7.3% growth rate as both domestic demand (-9.6%) and exports (-3.8%) decreased, and the manufacturing inventory ratio rose to 119.1%, 8.1 percentage points higher than the previous month (111.0%). The average operating rate of manufacturing (74.3% → 68.6%) also sharply declined compared to the previous month.
KDI assessed that exports in May continued a sharp decline (-23.7%) following the previous month’s (-25.1%), while political and economic tensions between the United States and China intensified, expanding external uncertainties.
The economic contraction across industries was also reflected in the labor market, with the number of employed persons decreasing by 476,000 in April, a much larger decline compared to the previous month (-195,000). In particular, employment sharply decreased in service industries involving frequent face-to-face contact (-314,000 → -465,000), small businesses with fewer than 30 employees (-508,000), and temporary/daily workers (-783,000).
The Ministry of Economy and Finance plans to release the June issue of the Economic Trends report (Green Book) on the 12th. In the May Green Book, it was diagnosed that "recently, our economy has experienced continued poor employment indicators due to domestic demand contraction caused by COVID-19, and the decline in exports has increased, expanding downside risks to the real economy."
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