© Bloomberg. A medical worker in protective gear checks a temperature of a woman at a temporary coronavirus testing station in Seoul, South Korea, on Friday, May 29, 2020. In the wake of the new cluster, the South Korean government said it was temporarily closing public museums, parks and galleries in the Seoul metropolitan area and may consider stronger social distancing measures if the situation worsens.


(Bloomberg) — The Bank of Korea said unemployment and other economic fallout from the pandemic will accelerate already existing declines in South Korea’s potential growth rate.

Higher jobless rates, more people dropping out of the workforce, and a delayed recovery in corporate investment will exacerbate a downward trend that started before the coronavirus, the bank said in a report Monday.

Slowing population growth and the economy’s maturation were reasons the BOK last year cut its estimate for South Korea’s potential growth rate to 2.7%-2.8% for 2016-2020, down from rates above 3% for decades before that. An economy’s potential growth rate measures what it can theoretically produce without causing inflation to rise or fall.

BOK’s Lee Flags Need to Normalize Policy Once Crisis Calms

One positive factor that could help slow the decline would be if productivity improves amid a switch to a more a digitalized economy, the BOK said. President Moon Jae-in has pledged to create more tech jobs as part of a “New Deal” project that aims to boost South Korean innovation.

Still, the BOK’s report said it could take two to four years for employment to reach pre-pandemic levels, raising the risk of a jobless recovery as business hire less and people stop looking for work.

South Korea Jobless Rate Jumps to 10-Year High Amid Pandemic

Inflation may also stay low for some time as people respond to the crisis by saving more and shifting to online shopping, the BOK said. The central bank also said the government’s latest expansionary policies are aimed at disaster relief and unlikely to drive prices higher.

The BOK has cut its key rate by 75 basis points this year to a record low 0.5% to cushion the economy and keep companies afloat. This month, it extended its unlimited liquidity supply via repurchase agreements until the end of July.

©2020 Bloomberg L.P.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Source link