The nation’s per capita gross national income (GNI) saw its biggest annual drop in a decade in 2019, as the United States-China trade dispute weakened the value of the Korean won against the dollar, according to the Bank of Korea (BOK), Tuesday (02 June 2020).
The GNI per capita last year came in at $32,115, down 4.3 percent from 2018. The central bank said this was the biggest decline since 2009 when the figure dropped by 10.4 percent from the previous year due to the aftermath of the global financial crisis.
This has raised concerns that the figure for 2020 may fall below the symbolic $30,000-mark due to the COVID-19 shock here and abroad. The global pandemic has dealt a severe blow to the local economy, resulting in a steep decline in exports and private consumption.
The BOK played down this possibility, saying this scenario would only be feasible if the value of the won continued to plunge by more than 5 percent against the dollar through the end of 2020. This means the won-dollar exchange rate should remain in the range of between 1,250 to 1,260 won until the end of the year, according to the central bank.
Local economists also said the chances of the GNI dropping to the $20,000-mark remain slim, as the government would likely take additional fiscal policy steps if there were signs of a steep economic downfall.
“The government will introduce additional expansionary fiscal policies to maintain the GNI above the $30,000 range,” Korea Capital Market Institute economist Noh San-ha said.
“For instance, the financial authorities can provide another emergency relief fund to the self-employed deemed as the most vulnerable to the COVID-19 shock,” he said.
The central bank also said GDP during the first quarter contracted 1.3 percent, the biggest quarterly decline since the fourth quarter of 2008 when the figure shrank 3.3 percent.
This was due to contractions in the services industry and private consumption and falls in exports due to the pandemic shock, according to the BOK.
The services industry was one of the areas hit hardest by the virus-induced shocks. The industry ― represented by transportation, food, and retail businesses ― contracted 2.4 percent between January and March, compared to a quarter ago.
The central bank expects GDP in the second quarter to contract further.
“Second-quarter GDP is estimated to shrink in the low to mid-2 percent range,” Park Yang-soo, director of the BOK’s economic statistics bureau, said in a press conference.
“But GDP between April and June will be determined by the export figure and how much the government’s first and second expansionary fiscal budgets help rev up the economy,” he said. “Also of note is the reviving signs of the U.S.-China trade dispute and its potential impact on the economy here.”