South Korea in the second quarter plunged into recession in its worst economic decline in more than two decades as the COVID-19 pandemic battered exports and social distancing curbs paralyzed factories.
Asia’s fourth-largest economy shrank by a seasonally adjusted 3.3 percent in last month’s quarter from three months earlier, the Bank of Korea said yesterday.
That is the sharpest contraction since the first quarter of 1998 and steeper than a 2.3 percent fall shown in a Reuters poll.
South Korea joins Japan, Thailand and Singapore in technical recession, defined as two straight quarters of decline, as the pandemic slams Asia’s trade-reliant economies.
However, analysts and policymakers are looking at the prospect of a recovery that would be faster than those of its regional peers.
“It’s possible for us to see China-style rebound in the third quarter as the pandemic slows and activity in overseas production, schools and hospitals resume,” South Korean Minister of Finance Hong Nam-ki said after the data was released, referring to China’s return to growth in the second quarter after a deep slump earlier in the year.
South Korea’s GDP fell 2.9 percent year-on-year, the biggest fall since the fourth quarter of 1998 and worse than a 2 percent decline shown in the poll.
Exports, which account for nearly 40 percent of the economy, were the biggest drag on growth, dropping by 16.6 percent on-quarter to mark the worst reading since 1963.
South Korea’s POSCO, the world’s fifth-biggest steelmaker, reported an 84.3 percent drop in operating profit in the second quarter as global demand for steel plummeted.
“While consumer spending should gradually recover, the threat from the virus is unlikely to fade entirely and some social distancing will probably have to remain in place,” Capital Economics Asia economist Alex Holmes said.
“Meanwhile, global demand is only likely to recover slowly, which will weigh on the export recovery,” Holmes added.
South Korea has reported almost 14,000 infections and about 300 deaths since the start of the pandemic, relatively low numbers by global standards, although the economic disruptions have been significant.
Construction investment fell 1.3 percent quarter-on-quarter, while capital investment declined 2.9 percent.
Output from manufacturing and the service sector fell by 9 percent and 1.1 percent respectively.
One saving grace has been a 1.4 percent gain in private consumption from three months earlier, thanks to government cash handouts that boosted spending on restaurants, clothes and leisure activities.
The government has rolled out about 277 trillion won (US$232 billion) worth of stimulus to fight the economic fallout from the pandemic so far.
However, policymakers have little control over the global demand for the country’s exports, which includes everything from memory chips to vehicles to petrochemical products.
For the whole of this year, analysts have said the economy could decline by a median 0.4 percent, which would be the first full-year contraction since 1998. The IMF estimates an even bigger 2.1 percent contraction.
Last week, the Bank of Korea’s governor said a downward revision from its previous projection of a 0.2 percent decline for this year was inevitable.
FIVE NEW FABS: An acquisition of Siltronic would boost GlobalWafers’ market share from 17 to 30 percent, easily surpassing Japanese rival Sumco’s 25 percent GlobalWafers Inc (環球晶圓) yesterday said it is in final talks to acquire Germany-based Siltronic AG in a 3.75 billion euro (US$4.5 billion) deal, which might help it compete with its closest rival Sumco Corp of Japan. The acquisition would be the fifth for GlobalWafers since 2008, as it has grown to become the world’s No. 3 supplier of silicon wafers through such deals. GlobalWafers, which has a 17 percent market share, would see its market position greatly elevated to 30 percent when combined with Siltronic’s 13 percent, according to a presentation Siltronic gave to its investors at a quarterly conference in August. Sumco
With the speed cryptocurrency is emerging as the millennial generation’s alternative asset of choice in India, it is hard to imagine that just two years ago a couple of blockchain pioneers were briefly in police custody. Sathvik Vishwanath and Harish BV, cofounders of a then five-year-old start-up, were arrested in late 2018. No, they had not pulled off a shady initial coin offering. Their “crime” was that they put up a kiosk in a mall in Bangalore where customers could swap bitcoin, ether or ripple for cash or vice versa. That was the whole point of unocoin, their crypto token exchange.
CONCERNS: The bank would act if it noticed currency speculation, the governor said, but he did not comment on a likely trajectory of the NT dollar against the greenback The central bank would intervene in the market whenever necessary to help stabilize the New Taiwan dollar, central bank Governor Yang Chin-long (楊金龍) said yesterday, adding that it is concerned Taiwan might be placed on the US watchlist for currency manipulation. The Control Yuan recently sent letter inquiring about the central bank’s market regulation efforts, Yang told a meeting of the legislature’s Finance Committee on the NT dollar’s appreciation and property price hikes. “It is the central bank’s top responsibility to stabilize foreign exchanges,” he said. The central bank has often stepped in toward the end of trading sessions to moderate the NT
Qualcomm Inc expects global shipments of 5G smartphones to more than double to between 450 million and 550 million units next year from this year, driven by increasing 5G network deployment worldwide and broader adoption of 5G technology beyond smartphones, a company executive told a virtual news conference yesterday. The San Diego-based company said that more than five times more telecoms have commercially launched 5G services in the first 18 months of the 5G era, compared with wireless technology transitions to previous generations. The momentum is to pick up speed in 2022, with the shipment volume of 5G-ready smartphones projected to reach