June 26, 2022

The Korea Development Institute (KDI) reports the country’s economy to be on the track of steady recovery. However, it is facing increasing downside risks due to the spread of the new omicron COVID-19 variant.

According to KDI in a monthly economic assessment report, the country’s service industry has improved due to the vaccine rollout. However, the recovery of the manufacturing sector has been limited due to global supply chain bottlenecks.

The country in order to gradually return to normal life began implementing its “living with COVID-19” scheme with relaxed virus restrictions on Nov. 1, thus improving private spending. While the retail sales also rose in October as economic activity increased during the vaccine rollout.

But again, the scheme was short lived over rise in virus cases and the emergence of the omicron variant, prompting health authorities to toughen restrictions on private gatherings and tighten other quarantine measures this week.

According to the health authorities, the country added 4,954 new COVID-19 infections as on Tuesday. It also reported 12 more omicron infections, raising the total to 36.

The Bank of Korea mentioned the Korean economy to grow 0.3 percent in the third quarter from three months earlier, slowing from a 0.8 percent on-quarter gain in the second quarter.

Private spending in the third quarter retreated 0.2 percent, compared with a 3.6 percent increase the previous quarter.

The central bank also said the country’s economy may expand 4 percent this year. This would be possible only if the on-quarter economic growth reaches 1.03 percent in the fourth quarter.

The government in a bid to help the country’s economic recovery gain traction has allocated 73 percent of fiscal spending for implementation in the first half of next year.

According to the Ministry of Economy and Finance, the government in the January-June period initially plans to use 363.5 trillion won (US$307.7 billion) of next year’s budget spending of 497.7 trillion won.

The ministry intends to spend the allocated amount on supporting quarantine efforts, such as small merchants hit hard by the pandemic and boosting spending on research and development (R&D) in the first half of next year.