S. Korea’s ‘economic uncertainty’ soars in May amid pandemic

South Korea’s “economic uncertainty” is precarious amid clear signs of a downturn triggered by the coronavirus pandemic, data showed Tuesday.

The latest index of think tank Economic Policy Uncertainty indicates South Korea’s rate reached 428.82 in May, up sharply from 239.36 estimated in November 2019. 

This marked the highest level since August last year, when the figure surged to 538.18 as tensions between the US and China escalated over trade issues. The index then dropped to 159.15 in February, but soon surpassed the 400-level months later. 

The EPU index, developed in 2016, measures economic uncertainty of countries. The evaluation is based on several indicators, including the frequency at which newspapers such as the New York Times and the Wall Street Journal cite expressions like “uncertain” or “uncertainty” in relation to a certain country’s economic policies. Other index components include tax code revisions and disagreement among economic forecasters.

The surge in the country’s economic uncertainty index came amid a steady rise of new virus cases as well as the coronavirus-battered economy. 

Korea faced sporadic cluster infections tied to entertainment facilities and a hospital in May after it had been recording fewer than 10 new daily confirmed cases, putting further strain on the government’s quarantine efforts and social-distancing guidelines. 

As the coronavirus has raged at home and abroad, the country’s exports fell by 23.6 percent in May, marking the second consecutive month of decline, owing to lockdowns across the globe, according to the Ministry of Trade, Industry and Energy.

Growing economic uncertainty here resonates with a recent economic outlook for the nation from the International Monetary Fund, which projected Asia’s fourth largest economy to contract 2.1 percent this year, down from its April outlook to reflect a deepening global recession from the ongoing pandemic. 

“Unless the COVID-19 infections slow down, economic uncertainty will continue to soar in the second half of this year,” said Hwang Sei-woon, research fellow at Korea Capital Market Institute.

“Other external factors, including rising US-China tensions as well as Seoul-Tokyo conflicts caused by Japan’s export controls, would also amplify such concerns over the local economy.”

By Choi Jae-hee (cjh@heraldcorp.com)