[Economic Outlook] Focus on Q1 GDP Growth Rate... Recovery to Pre-COVID-19 Levels?

Trends in Industrial Activity and Consumer-Enterprise Sentiment Indicators Released
Key Question: Will Economic Improvement Continue Amid Ongoing COVID-19 Spread

[Asia Economy Reporter Eunbyeol Kim] This week, the real Gross Domestic Product (GDP) growth rate for the first quarter (January to March) will be announced. Although the spread of COVID-19 continues to have a significant impact on the economy, the key issue is whether the GDP level has continuously rebounded, supported by export recovery, and has returned to the pre-COVID-19 level.

In addition, the latest indicators that provide insight into the current state of South Korea's economy and the economic sentiment of its agents, such as the March Industrial Activity Trend, April Consumer Sentiment Index (CSI), and Business Survey Index (BSI), are also scheduled to be released next week.

The Bank of Korea will release the preliminary real GDP figures for the first quarter on the 27th. Last year, the annual real GDP growth rate was -1.0%, and the real GDP, which was 468.8143 trillion won in the fourth quarter of 2019, just before COVID-19, decreased to 463.395 trillion won in the fourth quarter of 2020.

According to the Bank of Korea's own analysis, if the GDP growth rate for the first quarter of this year is around 1.3%, the overall GDP level can recover to the fourth quarter of 2019 level. This is an arithmetical estimate based on last year's quarterly growth rates (compared to the previous quarter). Last year's quarterly growth rates were ▲ Q1 -1.3% ▲ Q2 -3.2% ▲ Q3 2.1% ▲ Q4 1.2%.

The Bank of Korea will also release the results of the 'April Consumer Sentiment Survey' on the 28th and the 'April Business Survey Index (BSI)' on the 29th. Last month, the Consumer Confidence Index (CCSI) rose to 100.5 for the third consecutive month, surpassing 100 for the first time since January last year (104.8). The BSI for business performance across all industries (83) also reached its highest level in about 10 years since July 2011 (87). With the continued spread of COVID-19 and slow vaccination progress, attention is focused on how long the domestic economic sentiment improvement trend will continue.

Statistics Korea will announce the 'March Industrial Activity Trend' on the 30th. The Industrial Activity Trend is the most comprehensive coincident indicator to diagnose South Korea's real economy situation, allowing an estimate of the extent of economic recovery. In February, total industrial production increased at the fastest rate in eight months, recovering to pre-COVID-19 levels.

On the same day, the Ministry of Economy and Finance will disclose last year's public institution management information. A major concern is how much the debt of public institutions increased last year due to the impact of COVID-19. There are cases where direct losses were incurred due to COVID-19, and many cases where the scale of operations was expanded in response to the pandemic, leading to expectations that debt has increased unprecedentedly.