S. Korea reports worst economic performance in more than 20 years

Asia’s fourth-largest economy contracted 2.9 percent year-on-year in the April-June period, the Bank of Korea said.

It was the fastest decline since a 3.8 percent drop in the fourth quarter of 1998, in the aftermath of the Asian financial crisis.

Quarter-on-quarter, it shrank 3.3 percent, also the worst showing in more than 20 years.

South Korea endured one of the worst early outbreaks of the coronavirus outside mainland China, and while it never imposed a compulsory lockdown, strict social distancing was widely observed from March until it started loosening restrictions in May.

But its economy has been unable to escape the global impact of the pandemic.

The country is highly trade-dependent, and exports plunged 13.6 percent year-on-year in Q2 — the sharpest decline since 1974, in the wake of the OPEC oil crisis.

The decline was driven by “decreases in motor vehicles and coal & petroleum products”, the Bank of Korea said in a statement.

The BOK forecast in May that the economy will shrink 0.2 percent in 2020, a dramatic downgrade from its February forecast of 2.1 percent growth.

But its governor Lee Ju-yeol said last week another downward revision to the prediction was “inevitable”, noting export declines were “deeper than previously expected”.

The International Monetary Fund last month also cut its growth forecast for South Korea, predicting it would shrink 2.1 percent this year — compared with an average 8.0 percent decline for the world’s advanced economies.