An analysis has emerged suggesting that while Korea's economy is likely to enter a recovery cycle from the second quarter after hitting a low in the first quarter, the pace of recovery will be slow.
On the 8th, the Hyundai Research Institute stated in a report titled 'Urgent Need for Active Economic Revitalization Efforts to Escape Negative Growth' that while the likelihood of an economic rebound in the second quarter seems high, the recovery will be weak.
As a signal of potential economic rebound, the institute presented the cyclical component of the coincident index. This index, which reflects the current economic situation, showed an upward trend for three consecutive months since hitting its lowest point in January. The cyclical component of the leading index, which reflects future economic conditions, also showed a concurrent upward trend.
However, the stagnation in domestic sectors such as private consumption and construction investment is a factor restricting recovery.
The export economy in the second quarter is not optimistic due to the impact of the U.S. tariff increase policy.
The institute presented future economic outlook scenarios, which include ▲ a U-shape (a gradual recovery scenario), ▲ 'Swoosh' (a Nike logo shape, a slow recovery scenario), and ▲ a Double Dip (a recession scenario).
The basic scenario is in the 'Swoosh' shape, with the expectation that while the Korean economy will enter a phase of recovery, the pace of future improvement will be slower than the economic decline of last year.
The U-shape is an optimistic scenario where the pace of economic recovery is similar to last year’s economic decline, significantly improving the economic situation by the end of this year.
The double dip is a pessimistic scenario where the economy rebounds but then falls back into a recession. The institute projected that if global trade wars intensify beyond expectations, together with the loss of timeliness in supplementary budgets and hawkish currency policy among macroeconomic policy responses, a double dip might occur.
Ju Won, head of the Economic Research Division at the Hyundai Research Institute, said, 'Based on the basic Swoosh scenario, we expect the economic growth rate this year to be 0.7%,' adding that in the U-shape it would be in the 1% range, and in the Double Dip, in the early 0% range.
The Hyundai Research Institute lowered the economic growth forecast for Korea to 0.7% in early last month.
The institute advised that for the future of Korea's economy, policy efforts to expand growth potential must continue, noting that 'it is important to recognize the urgency of escaping the economic recession in the short term.'
As measures for each sector, they mentioned efforts to activate the construction economy led by supply, swift conclusion of tariff negotiations with the United States, ongoing economic cooperation with China, and expanding effective and productive welfare policies to stabilize the lives of vulnerable groups.