S. Korean economy shrinks revised 3.2% on-quarter in Q2

 
South Korea's economy shrank at a slower-than-estimated pace in the second quarter from three months earlier amid the COVID-19 pandemic, central bank data showed Tuesday.

The country's real gross domestic product (GDP) contracted 3.2 percent in the April-June period from the previous quarter, the biggest on-quarter drop since a 3.3 percent retreat posted in the last three months of 2008, according to preliminary data from the Bank of Korea (BOK).

But the reading marks a slight increase from an earlier estimate of a 3.3 percent contraction estimated in July and compares with a 1.3 percent decrease in the first quarter of the year, the data showed.

From a year earlier, the local economy shrank 2.7 percent in the second quarter, compared with a 1.4 percent on-year expansion in the previous quarter.

The BOK said decreased outbound shipments are to blame for the economic contraction in the second quarter.

Exports -- which account for about half of the South Korean economy -- fell 16.1 percent in the second quarter due to lower overseas demand for vehicles and mobile handsets amid the global coronavirus pandemic.

It marked the biggest on-quarter decline since the fourth quarter of 1963 when outbound shipments posted a 24 percent on-quarter drop.

The BOK said the manufacturing segment fell 8.9 percent in the second quarter from three months earlier, while the construction sector contracted 0.3 percent and facility investment fell 0.5 percent.

Meanwhile, consumer spending grew 1.5 percent in the second quarter from three months earlier due to virus relief handouts, a temporary tax cut on purchases of passenger cars and improved consumer sentiment on a decline in COVID-19 cases, Park Seong-bin, director of the BOK's National Accounts Division, said in a briefing.

South Korea had been getting the virus under control, with the daily new cases staying in double-digit figures, until early August. But multiple cluster infections in the greater Seoul area, from churches to office buildings, started to break out and undermined the country's quarantine efforts.

On Tuesday, South Korea marked a grim milestone as its total COVID-19 cases surpassed 20,000.

In May, the government offered relief funds totaling 14.3 trillion won ($12 billion) to all households as part of efforts to cushion the economic fallout from the new coronavirus.

Last month, the central bank forecast a 1.3 percent contraction for Asia's fourth-largest economy in 2020 amid the deepening virus fallout, sharper than its estimate in May of a 0.2 percent retreat.

The BOK said the economy is expected to contract 2.2 percent this year in the worst-case scenario in which the flare-up in virus outbreaks continues into the winter. (Yonhap)