Deflation Concerns Deepen as Coronavirus Rages on

  • By Kim Eun-jung

    March 04, 2020 11:46

    Fears are mounting over a chronic slowdown amid low growth and low consumer prices exacerbated by the coronavirus epidemic.

    A report released by the Bank of Korea on Tuesday shows per-capita gross national income last year declining 4.1 percent from 2018 to US$32,047, and that was even before the outbreak.

    Per-capita GNI surpassed $30,000 mark for the first time in 2018, making it seem as if Korea had joined the ranks of advanced countries. Some economists expected it to reach $40,000 in 11 years if the economy grows 2.7 percent in line with the country's potential growth rate.

    But the economy grew only two percent last year. As of 2018, the per-capita GNI of Japan, Germany, the U.K. and France was $40,000 and the U.S.' $60,000, though income distribution is much worse there.

    Korea's per-capita GNI declined to 1.1 percent, the lowest since 1998 (-0.9 percent) in the aftermath Asian financial crisis. Korea's nominal growth rate last year is estimated at 34th out of 36 member nations of the OECD only ahead of Norway (0.5 percent) and Italy (0.8 percent).

    The exchange rate is not helping either. The Korean won weakened 5.9 percent against the U.S. dollar last year, resulting in lower profits in dollar terms.

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