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UOB’s Group Economist Ho Woei Chen, CFA, noted that South Korea’s GDP figures are likely to be revised lower in the next periods based on the impact on the economy of the coronavirus pandemic.

Key Quotes

“Economic outlook has weakened considerably led by consumption while the investment recovery has stalled. The BOK sees downside economic risks from a prolonged spread of COVID-19 and a delay in the semiconductor industry’s recovery. However, the mitigating factors include the faster-than-expected resumption to normality in China as well as the aggressive actions taken by the South Korean and foreign policy makers.”

We expect the BOK to slash its 2020 growth forecast of 2.1% at its next outlook review. We note that the central bank did not give an updated growth forecast in the accompanying policy statement today. We project South Korea’s GDP to shrink by 1.0% in 2020, the worst since the Asian Financial Crisis when it contracted by 5.1%. We have factored in GDP contraction of -2.0% y/y in 1Q20 which will likely deepen to -3.2% in 2Q20 before some stabilization in the second half of the year. The pandemic developments form the greatest uncertainty in our growth forecast.”