South Korea’s economy shrank for the first time in 22 years in 2020, according to the country’s central bank, as the coronavirus pandemic destroyed service industry jobs and depressed consumer spending.
Preliminary data released by the Bank of Korea on Thursday showed the country’s gross domestic product (GDP) last year contracted 1% from 2019.
It was the first annual contraction since 1998 when South Korea was in the midst of a crippling financial crisis.
The economy expanded by a seasonally adjusted 1.2% in the final quarter, a notch above the 1.1% growth estimated in January.
The economy would have fared even worse if not for the country’s technology exports, which saw increased demand driven by personal computers and servers as the pandemic forced millions around the world to work at home.
A 5.2% jump in exports, following a 16% surge in the previous quarter, towed the growth, Reuters said in citing the data. Private consumption and facility investment shrunk 1.5% and 2%, respectively, better than the 1.7% and 2.1% contraction reported earlier.
The central bank expects South Korea’s economy to manage a modest recovery this year driven by exports. But it says it will take a longer time for the job market to recover from the damage to the services industries such as restaurants and transportation.
The bank since March last year has maintained its policy rate at an all-time low of 0.5% to help pump money into the economy. But experts say traditional financial tools aimed at lowering borrowing costs have only had a limited effect during the pandemic that has damaged both supply and demand.
The country reported 424 new cases of the coronavirus on Thursday, bringing its national case number to 91,240, including 1,619 deaths.
