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Indicators of gross domestic product (GDP) inspire optimism. The country’s economy grew 1.9 percent in the third quarter from a year earlier, and the government announced better-than-expected results and early positive results on Tuesday.
Compared to last year, growth contracted 1.3 percent, a smaller decline than expected. These figures are the second installment of upbeat data from North Asia in just over a week.
Recent statistics suggest that China is likely to be the only trading partner showing at least some growth this year. South Korea can be found nearby, as can Taiwan.
South Korea’s recovery in growth is driven by what comes out of the country: Exports account for about 40 percent.
The transition to telecommuting and science during the pandemic has given a positive boost to the country’s electronics and memory chip industry. Exports of other Korean products, such as chemicals and metals, are weaker.
While these conflicting data mean that Korea is vulnerable to a potential uprising in front of the conference room at the kitchen table, such a prospect does not seem inevitable. Even in global financial centers with strong executive government like Singapore, there is no rush to get back to the central offices. Work From Home, or WFH (Work From Home), remains a predicted constant in much of the world.
Seoul’s desire to shed decades of conservative and prudent budget trends is also saving. President Moon Jaein has launched four stimulus packages as part of a financial hit equivalent to about 14 percent. GDP. While the government is working to improve its books as soon as recovery is assured, it would be premature to relax now. Moon Jaein has the potential to do even more. South Korea’s public debt-to-GDP ratio is one of the lowest in the Organization for Economic Cooperation and Development (OECD).
Tight fiscal policy is associated with higher debt. The president of South Korea is assisted by a central bank that is willing to buy stability bonds quite regularly. While the Korean central bank avoids the term “quantitative easing,” it controls the price the government pays for money.
Perhaps the real achievement is that the country has slowed the spread of coronavirus infections and regained growth by avoiding large-scale quarantine or forced rapid economic opening. China is rescued by an authoritarian political system that can turn the key in any direction despite the defenses.
South Korea is a democracy. Adherence to physical distance, contact tracing, and setting (or repealing) other restrictions at the local level worked quite well.
Still, many things can go wrong. The global economic situation could deteriorate as a result of the recent increase in infections both in the United States and in European countries. And within Korea, the natural recovery felt when the economy emerges from recession will eventually breathe a sigh of relief. Before the pandemic, the country showed relatively slow growth. Unemployment is increasing. And while the recovery in growth provides relief, the contraction in the second quarter was the largest in a few decades.
But for now, let’s acknowledge the work that has been done really well.
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