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Korea's GNI drops amid pandemic shock

Shin Seung-cheol, director of the national accounts division at the Bank of Korea's, speaks during a press conference at the central bank's headquarters in Seoul, Thursday. Courtesy of Bank of Korea
Shin Seung-cheol, director of the national accounts division at the Bank of Korea's, speaks during a press conference at the central bank's headquarters in Seoul, Thursday. Courtesy of Bank of Korea

By Lee Min-hyung

Korea's per capita gross national income (GNI) dropped in 2020, declining for the second-straight year, in the face of an overall economic contraction amid the pandemic shock, the Bank of Korea (BOK) said Thursday.

The GNI per capita stood at $31,755 (37.47 million won) in 2020, down 1.1 percent from the previous year, according to BOK data.

This was attributable to the economic slowdown induced by the COVID-19 spread and the local currency's depreciation against the U.S. dollar, the central bank said. The coronavirus pandemic also resulted in a 1 percent contraction of the economy in 2020, according to the BOK.

"Three economic indices affect the GNI per capita, including real GDP growth, GDP deflator and exchange rates," Shin Seung-cheol, director of the central bank's national accounts division, told reporters during a press conference. The GDP deflator indicates price level changes and is calculated by dividing nominal GDP by real GDP.

"The GDP deflator displayed a 1.3 percent increase, but real GDP contracted by 1 percent and the exchange rate grew by 1.2 percent throughout last year," he said.

This was the first time the economy has contracted since the Asian financial crisis in 1998. The central bank attributed the drop in the GNI per capita last year to the economic slowdown caused by the pandemic. This also marked the first time since the 2008 global financial crisis that Korea's per capita GNI declined for two consecutive years, according to the central bank.

The BOK official expected the economy to achieve a turnaround in 2021.

"The economy is forecast to report positive growth in 2021," he said.

But it seems too early for the central bank to say for sure that the economy will be able to achieve a major rebound in a year, as the pandemic and its effects are unprecedented and unlike other financial crises witnessed in 1998 and 2008, he said.

Despite the annual contraction, the economy showed some signs of having bounced back in the fourth quarter, with GDP growing 1.2 percent from a quarter earlier, up 0.1 percentage points from the central bank's earlier forecast, according to data from the BOK. Exports of semiconductors and chemical products drove the growth.

"The decline in the GNI per capita was widely expected, as the pandemic shock last year was strong enough to cause the economy to contract," said Kang Hyun-ju, an economist at the Korea Capital Market Institute.

The economist expected Korea's economy to achieve growth in the 3 percent range this year unless the pandemic shock worsens. "The possible spread of any coronavirus variant will come as the biggest risk factor that may hurt the nation's economic growth in 2021," he said.



Lee Min-hyung mhlee@koreatimes.co.kr


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