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Vaccine delay to take heavy toll on Korean economy

A health worker holds some Pfizer coronavirus vaccines to vaccinate health workers, in Pamplona, northern Spain, Tuesday. AP-Yonhap
A health worker holds some Pfizer coronavirus vaccines to vaccinate health workers, in Pamplona, northern Spain, Tuesday. AP-Yonhap

By Kim Yoo-chul

A delay in the initiation of a public vaccination program will end up forcing the Korean economy to contract in 2021 as it will likely drag down consumer spending and business activities, a local think tank said in a report, Wednesday.

According to an analysis conducted by the Korea Economic Research Institute (KERI), the country's economy could continue to shrink next year if a prompt rollout of the coronavirus vaccine is delayed.

Both the Bank of Korea (BOK) and the Ministry of Economy and Finance have forecast that Asia's fourth-largest economy will shrink 1.1 percent this year.

"If the vaccine rollout campaign is delayed until the second quarter of next year, the country's economy will shrink for the second consecutive year," the KERI said in the report.

"Depending on the number of confirmed COVID-19 patients, the economic contraction could be between 2.7 percent and 8.3 percent."

It also expected that the vaccine rollout delay could cut Korea's trade volume in 2021 by 15.5 percent year-on-year, in the worst-case scenario.

"The KERI's internal analysis also showed the country's unemployment rate would rise by between 0.5 and 21.7 percentage points next year, upon rolling out of the coronavirus vaccine," it added.

But it expects if the government launches the public vaccination program in the first quarter of the year and the process goes smoothly, then the economy could grow 3.4 percent next year. With the country seeing increased deaths from COVID-19 alongside daily new infections rising to more than 1,000, the country is moving rapidly to procure more vaccines.

Amid a stubborn third wave of infections, which have been forcing the health authorities to further tighten social distancing measures, Cheong Wa Dae and the ruling party agreed to launch a public coronavirus vaccination program in late January, the earliest possible date.

Seoul had planned to stockpile vaccines but apparently delay administering them until other nations began to see how programs in the United States and European countries, which have been hit with more disastrous outbreaks, progressed.

After signing vaccine procurement agreements with AstraZeneca, Pfizer and Johnson & Johnson's Janssen, the government said it recently struck a similar deal with Moderna to procure 40 million doses. Moderna confirmed this saying potential distribution of the two-dose vaccine in Korea could start sometime in the second quarter of next year.

The KERI report came after the country's overall consumption declined for the second consecutive month amid a resurgence in daily new virus cases. The country's statistics agency said retail sales dropped month-on-month in November and added that they may also shrink in December amid the rising number of infections.

The government has been determined to fight the virus while keeping the economy operating as much as possible. The "dual-track" approach had worked as the country didn't close its borders with neighboring countries as seen in some countries in Europe, or lock down the country's major cities.


A health worker holds some Pfizer coronavirus vaccines to vaccinate health workers, in Pamplona, northern Spain, Tuesday. AP-Yonhap
A health worker holds some Pfizer coronavirus vaccines to vaccinate health workers, in Pamplona, northern Spain, Tuesday. AP-Yonhap

By Kim Yoo-chul

A delay in the initiation of a public vaccination program will end up forcing the Korean economy to contract in 2021 as it will likely drag down consumer spending and business activities, a local think tank said in a report, Wednesday.

According to an analysis conducted by the Korea Economic Research Institute (KERI), the country's economy could continue to shrink next year if a prompt rollout of the coronavirus vaccine is delayed.

Both the Bank of Korea (BOK) and the Ministry of Economy and Finance have forecast that Asia's fourth-largest economy will shrink 1.1 percent this year.

"If the vaccine rollout campaign is delayed until the second quarter of next year, the country's economy will shrink for the second consecutive year," the KERI said in the report.

"Depending on the number of confirmed COVID-19 patients, the economic contraction could be between 2.7 percent and 8.3 percent."

It also expected that the vaccine rollout delay could cut Korea's trade volume in 2021 by 15.5 percent year-on-year, in the worst-case scenario.

"The KERI's internal analysis also showed the country's unemployment rate would rise by between 0.5 and 21.7 percentage points next year, upon rolling out of the coronavirus vaccine," it added.

But it expects if the government launches the public vaccination program in the first quarter of the year and the process goes smoothly, then the economy could grow 3.4 percent next year. With the country seeing increased deaths from COVID-19 alongside daily new infections rising to more than 1,000, the country is moving rapidly to procure more vaccines.

Amid a stubborn third wave of infections, which have been forcing the health authorities to further tighten social distancing measures, Cheong Wa Dae and the ruling party agreed to launch a public coronavirus vaccination program in late January, the earliest possible date.

Seoul had planned to stockpile vaccines but apparently delay administering them until other nations began to see how programs in the United States and European countries, which have been hit with more disastrous outbreaks, progressed.

After signing vaccine procurement agreements with AstraZeneca, Pfizer and Johnson & Johnson's Janssen, the government said it recently struck a similar deal with Moderna to procure 40 million doses. Moderna confirmed this saying potential distribution of the two-dose vaccine in Korea could start sometime in the second quarter of next year.

The KERI report came after the country's overall consumption declined for the second consecutive month amid a resurgence in daily new virus cases. The country's statistics agency said retail sales dropped month-on-month in November and added that they may also shrink in December amid the rising number of infections.

The government has been determined to fight the virus while keeping the economy operating as much as possible. The "dual-track" approach had worked as the country didn't close its borders with neighboring countries as seen in some countries in Europe, or lock down the country's major cities.


Kim Yoo-chul yckim@koreatimes.co.kr


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