SEOUL (Reuters) – South Korea’s economy will likely return to growth in the third quarter, after recent economic data pointed to a gradual recovery, but a slump in exports remains a major concern, the country’s finance minister said on Friday.
The economy slipped into a technical recession in the second quarter, when it suffered its worst contraction in more than two decades, as the coronavirus took its toll despite government support measures.
“The government expects a sequential growth in the third quarter,” Hong Nam-ki told a briefing with foreign media outlets.
South Korea’s economy fell a seasonally adjusted 3.3% in the June quarter as the coronavirus pandemic battered exports and social distancing curbs paralysed factories.
That came even after the government rolled out some 277 trillion won ($233.82 billion) worth of stimulus packages including three supplementary budgets.
But the finance ministry said Asia’s fourth-largest economy is expected to do well compared to other major economies, citing a report from the Organisation for Economic Cooperation and Development (OECD) on South Korea.
The OECD said the country will take the smallest hit to growth of any advanced economy this year, by falling just 0.8%, after it was able to limit the spread of the coronavirus without imposing severe lockdowns. The OECD had previously forecast South Korea’s economy to shrink 1.2% this year.
It comes as the government cut its economic projections for this year in June, forecasting the economy would grow just 0.1% in 2020, which would be the worst performance since the 1998 Asian financial crisis.
“There are still significant risks to our forecast since it is based on a scenario (where) the coronavirus pandemic would cool down in the second half of the year,” Hong said.
Hong also said the ministry is currently not considering another supplementary budget, which would be its fourth for this year.
(Reporting by Joori Roh; Editing by Himani Sarkar and Ana Nicolaci da Costa)