Japan's Real GDP in 2020 Down 4.8%... Worst Since Global Financial Crisis (Comprehensive)

[Image source=EPA Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Due to the spread of COVID-19, Japan's annual real Gross Domestic Product (GDP) in 2020 declined for the first time in 11 years. However, there are evaluations that the economy showed a solid recovery by recording positive (+) growth in the fourth quarter following the third quarter.

According to NHK and others on the 17th, the Japanese Cabinet Office announced that the real GDP for 2020 recorded -4.8% (preliminary figure) compared to the previous year. This is the largest negative growth in 11 years since the global financial crisis in 2009 (-5.7%). Previously, the Japanese government had forecasted an economic growth rate of -4.2% for 2020 in July last year.

The real GDP in the fourth quarter of last year (October to December) increased by 3.0% compared to the previous quarter (July to September). Assuming this trend continues for a year, the annualized real GDP is estimated to have grown by 12.7% compared to the previous quarter. This marks positive (+) growth for two consecutive quarters following the third quarter, exceeding private economists' forecasts of 7 to 10.1%.

Bloomberg News analyzed, "Although the resurgence of COVID-19 is expected to shrink the Japanese economy again this quarter, the strong rebound at the end of 2020 gives hope that the economic recovery is relatively solid." Due to the resurgence of COVID-19 in Japan, uncertainty increased, and pessimistic forecasts for the fourth quarter GDP were dominant.

Earlier, Nihon Keizai Shimbun reported, "The dominant view is that the pace of recovery will slow down," adding, "The resurgence of COVID-19 domestically and internationally casts a shadow."

The GDP growth rate in the fourth quarter of last year appears to have been driven by increased household spending due to improved trade with China and government subsidies for travel and dining out.

Meanwhile, due to the impact of COVID-19, the Japanese economy plunged to a record low of -28.1% in the second quarter of last year, then sharply rebounded by 22.9% in the third quarter, showing significant fluctuations.