S Korea expects GDP to grow 3.2pc in 2021

SEOUL (XINHUA) – South Korea expected real gross domestic product (GDP), adjusted for inflation, to grow 3.2 per cent in 2021, after contracting this year amid an economic fallout from the COVID-19 pandemic.

The real GDP was forecast to rebound next year based on a scenario that massive vaccination campaign may begin in the second half of 2021, the Ministry of Economy and Finance said yesterday in its economic outlook report.

The Asian economy was predicted to slump 1.1 per cent in 2020 due to the COVID-19 pandemic. The country’s real GDP contracted only twice with declines of 1.6 per cent in 1980 and 5.1 per cent in 1998 each.

Other major institutes at home and abroad unveiled dimmer growth outlooks for the South Korean economy given that the government tightened its five-tier social-distancing rules to the second-highest amid the prolonged COVID-19 resurgence.

The Bank of Korea (BOK) and the state-run Korea Development Institute (KDI) projected the economy to go up 3.0 per cent and 3.1 per cent each in 2021, while the 2021 outlooks from the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD) stood at 2.9 per cent and 2.8 per cent respectively.

In the latest tally, South Korea reported 1,014 more cases of COVID-19 for the past 24 hours, lifting the total number of infections to 46,453. The daily caseload hovered above 100 for 40 straight days since November 8.

A cosmetics shop assistant looks out from the store at the Myeongdong shopping area in Seoul, South Korea. PHOTO: XINHUA

Expectations ran high for the social-distancing guidelines to be toughened further to the highest level, or an actual shutdown to stop the operation of most of businesses, in the near future.

Private consumption was forecast to expand 3.1 per cent in 2021 after diminishing 4.4 per cent in 2020. The record-low policy rate was expected to prop up the consumer spending with borrowed money next year.

The BOK has left its benchmark interest rate unchanged at an all-time low of 0.50 per cent since May.

Export, which accounts for about half of the export-driven economy, was projected to pick up 8.6 per cent next year after retreating 6.2 per cent this year.

Import was forecast to rebound 9.3 per cent next year after sliding 7.5 per cent this year.

Growth forecasts for facility investment and the investment in the construction segment were set at 4.8 per cent and one per cent each next year.

The number of jobs was forecast to increase 150,000 in 2021, while outlook for the employment rate among those aged 15-64 was placed at 65.9 per cent for next year.

Outlook for current account surplus was set at USD63.0 billion in 2021, while headline inflation forecast was put at 1.1 per cent.

The government planned to focus on boosting the lackluster consumer spending next year by increasing an income tax deduction on credit card spending, extending a consumption tax cut for car purchase and offering a refund for the purchase of energy-efficient home appliances.

To bolster employment next year, the government will provide financial support for private companies that hire workers while increasing employees in the public sector early next year.