Asia's fourth-largest economy expands at fastest pace in 11 years
By Yi Whan-woo
The Korean economy is expected to continue its recovery in the first quarter of 2022 despite the spread of the Omicron variant, as it is becoming more resilient to the fallout of the COVID-19 pandemic, according to multiple analysts, Tuesday.
Omicron will remain a stumbling block, but even so, it should not put a major drag on the momentum of recovery, the experts said.
They noted that its economic impact is limited and that the government, with the presidential election coming on March 9, will remain supportive of pandemic-stricken households and businesses in terms of fiscal policy.
The optimistic outlook for the January-March period came after the Bank of Korea (BOK) reported Tuesday that Korea's economy had expanded 4.0 percent in 2021 ― the country's fastest growth in 11 years, since expanding 6.8 percent in 2010.
The nation's GDP grew 1.1 percent in the October-December period, a major turnaround from the third quarter's meager 0.3 percent expansion. The fourth-quarter GDP boosted Asia's fourth-largest economy accordingly to reach the annual growth target of 4 percent.
| Hwang Sang-pil, head of the economic statistics bureau at the Bank of Korea (BOK), gives a press briefing on Korea's yearly growth at the BOK's headquarters in central Seoul, Tuesday. Yonhap |
"The lesson of previous waves is that the economy has become increasingly resilient to the virus, in part because of the usage of e-commerce," Alex Holmes, the Emerging Asia economist at the London-headquartered economic research institute Capital Economics, said in an email circulated to financial journalists in response to the BOK's announcement.
Holmes went onto say that, despite the looming wave of Omicron that weighs on consumer spending, "The impact of Omicron will be relatively brief and the consumer recovery will get back on track later this year."
Lee Da-eun, an economist at Daishin Securities, viewed Omicron's effects on the economy to be at their peak or even past it.
She cited the declines in travel expenditures, dining out and other outdoor activities that the waves of the pandemic have wreaked havoc on are not as severe as in the past.
The resilience in face-to-face services was attributed to a 1.7 percent increase in private consumption in the fourth quarter. Private consumption was a leading factor for quarterly growth, along with exports, government spending and construction investments.
Exports remained robust and rose 4.3 percent, while government spending expanded 1.1 percent and construction investment increased 2.9 percent.
"And what makes the outlook in the first quarter brighter is that there is more to come in terms of the increase in private consumption when social distancing is eased," Lee said.
The expansionary fiscal policy is also possible, as a part of an effort to woo voters in the lead-up to the presidential election on March 9, according to Julia Kim, the head of research and planning at the Institute for Global Economics.
"The government by all means will try to boost consumer spending and spur on the economy," she said.
Regarding external factors, she assessed the Korean economy will be able to cope with the U.S. Federal Reserve's anticipated multiple rate hikes in 2022.
Meanwhile, Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki lauded the country's economy as "undeniably strong against risks."
Hong argued on Facebook that Korea is more resilient than other G20 countries.
With the scale of overall global resilience at 100 in the pre-pandemic year of 2019, Korea posted a 103.1 in 2021. It was higher than the U.S.' figure of 102, Australia's of 101.3, Canada's of 99.2, France's of 98.3, Germany's of 97.8, Japan's of 97.2, Italy's of 96.7 and the United Kingdom's of 96.6.