SEOUL: South Korea on Monday (Jun 1) cut its economic projections for this year to growth of just 0.1 per cent, which would be the worst performance since the 1998 Asian financial crisis, as the coronavirus pandemic hit exports, consumption and corporate investment.
That is sharply down from its previous projection of a 2.4 per cent expansion made before the outbreak and comes after compiling a total of 250 trillion won stimulus package - 13.1 per cent of gross domestic product - to combat the virus fallout.
The government's view that growth will ground to a virtual halt is slightly better than an expected 0.2 per cent contraction seen by the Bank of Korea, and a 1.2 per cent decline projected by the International Monetary Fund.
"(The coronavirus outbreak) led to an unprecedented slump in domestic demand, which maximised fears and caused shock in financial and labour markets," Deputy Finance Minister Bahng Ki-sun told a briefing prepared for the release on Monday (Jun 1).
"Recovery in domestic demand will likely be limited due to deepening slump in external demand and uneasy sentiment, and can worsen if the second wave materialises ahead of winter," he added.
South Korea's economy grew 2.0 per cent in 2019 and the new growth target would be the slowest since a 5.1 per cent contraction seen in 1998 Asian financial crisis.
Outside the coronavirus, tensions between China and the United States over Beijing's policy on Hong Kong could further derail recovery, the nation's finance ministry said.
Breakdown of forecasts showed private consumption for the whole of 2020 is expected to slip 1.2 per cent from a year earlier, far worse than a projection of 2.1 per cent growth set in December.
Exports are also expected to shrink 8.0 per cent, sharply down from 3.0 per cent growth seen earlier.
Factory shutdowns and various measures to contain the virus, including social activity restrictions, have hit household and business spending.
The BOK cut its policy rate to a record low last week, working in tandem with the government to extend liquidity to businesses hit by the coronavirus pandemic.