Time to turn crisis into opportunities
South Korea's industrial output rebounded in June, despite the resurgent COVID-19 pandemic. This is raising hopes for an economic recovery, although it is still too early to talk about when COVID-19 will be brought under control.
According to Statistics Korea, overall industrial production increased 4.1 percent in June from a month earlier. This represented a solid recovery from a 1.2 percent contraction in May. It also marked a slight rise of 0.7 percent from June 2019.
It is notable that production in manufacturing, mining, gas and electricity industries climbed 7.2 percent month-on-month in June. The strong rebound was the sharpest monthly growth since February 2009 when the 2008 global financial crisis hit the Korean economy. Production of chips and cars grew 3.3 percent and 35.7 percent, respectively, leading the way.
More encouraging is that investment and consumption also rebounded. Facility investment expanded 5.4 percent in June, and retail sales rose 2.4 percent. It was the first time since last December that the three major economic indicators have enjoyed positive growth all at the same time.
Vice Finance Minister Kim Yong-beom described the June data as a “clear sign of recovery.” He predicted the slumping economy would turn around in the third quarter, after shrinking 3.3 percent in the second quarter and 1.9 percent in the first quarter. Every Korean hopes his prediction will become reality sooner than later.
The upbeat indicators are seen as a result of rapid normalization of economic and business activities that have been in the doldrums since the first virus infection was confirmed here in late January. Disaster relief funds to each household and injections of massive fiscal support into the market have also begun to help boost the economy.
Yet we need to have cautious optimism because exports, the country's growth engine, have yet to rebound. The overall expectation is that the COVID-19 pandemic will not die down quickly. Thus, pessimism still prevails over economic prospects not only for South Korea but also the world.
However, the silver lining over the dark economic cloud is that many countries, especially developed ones, are reopening their economies rapidly as part of efforts to go back to normal in the face of the pandemic. In this situation, the pace of decline in South Korea's exports has slowed thanks to the worldwide reopening. Overseas shipments nosedived 23.7 percent in May and 10.9 percent in June. But the fall was narrowed to 7 percent last month.
Now, policymakers, businesspeople and consumers should double down on speeding the economic recovery. Most of all, the Moon Jae-in administration should be more active in promoting innovation and deregulation to create a better business environment. The private sector also must expand investment and offer more jobs to turn the pandemic-driven crisis into new opportunities.