Introduction To Business Topic- Analyzing The Korean Economy During And After Covid-19 Pandemic Via Economic Indicators.pdf

UNIVERSTTY OF ECONOMICS FACULTY OF INTERNATIONAL BUSINESS University of Economics INTRODUCTION TO BUSINESS Topic: Analyzing the Korean economy during and after COVID-19 pandemic via ec

UNIVERSTTY OF ECONOMICS FACULTY OF INTERNATIONAL BUSINESS

University of Economics

INTRODUCTION TO BUSINESS Topic: Analyzing the Korean economy during and after COVID-19 pandemic via

economic indicators

Student’s name: Nguyen Hanh Minh

Nguyen Tran Hai Nam Huynh Phan Thao Nghĩ

Vo Tran Anh Nguyet Tran Mai Ai Nhien

Da Nang, 2024

Introduction to business 49K01.1-E

TABLE OF CONTENT TNTRODUCTION 1 CHAPTER 1: PRE-PANDEMIC ECONOMIC INDICA TORS o-5 5 s25 s5 2

4.1.1 Emergency Disaster Relief Funds ccccccccecsecsesseesesecesesseserssesessessessessessenaes 5 4.1.2 Support for Small and Medium-s1zed Enterprises (SME8): c2 5 4.1.3 _ Job Retention and CTeatiOn: n2 111211111111 111112111111111 111 11 tk, 5

4.1.5 _ Tax Reliefand DefErral: St S2 122112111 11111111 111110111111 1t Hà hy 5 4.1.6 Healthcare and Soclal S€TVIC€S: Qà cọ L 9H12 1111111111111111 111 H1 HH ru 5 4.2, Monetary policy adjustments of KOT€a 12111 9111 1111811011111 1111 8 xay 5

4.2.2 _ Liqutdity PTOVISIOH L1 2n H11 911111011111 1101111 011111111 0111k ray 6 4.2.3, Credit Support PrOBTaIms c n2 v 191111011111 110111110181 11 0118111110111 re 6 4.2.4 _ Foreign Exchanøe ÏnterV€ntIONS ác 2n HH v S99 H111 1811111111111 k ray 6 (co an 7 4.3.1 Economic rebound c tt 212111111 1111111111111 111011111 H111 0111 11 He, 7

Introduction to business 49K01.1-E CHAPTER 5: CHANGES IN ECONOMIC INDICATORS DURING THE PANDEMIC

CHAPTER 6: FƯTURE OUTLOOK AND CHALLENGES G55 25550 1

6.1 Comparison with Other COUITICS: ó2 1 121211011113 111 1111 21111112111 11 1 01x hư ch 11 6.1.1 South Korea's Response Compared to Global Counterparfs: .+ss+ +2 11 6.1.2 Economic Performance Compared to Similar EeonomIes: ‹- s22 +2 12 6.2 Future Outlook and Challeng€§: - 12c 1 2112 121111011911 11012111 1101111101111 01111 kg 12 6.2.1 Long-Term Impact on the Economy:, 1 t1 1211111211911 11 2110111215111 x re 12 6.2.2 Struetural Changes In IndUsSfrI€S: - - 12t 1211211211111 118111 1011111181 1111011 ray 12 6.2.3 Potential Risks and UnceTfa1nf1€S: c2: t1 2121121111111111111111 11111101811 tre 12 REFERENCES 14

LIST OF ABBREVIATIONS

Organization for Economic Cooperation and

Introduction to business 49K01.1-E

LIST OF TABLES

Table 1: Shopping frequency of Koreans befre and after COVID-19 ccccesisereee 4 Table 2: Regional distribution of employment loss and COVID-19 intensity - - 8 Table 3: Real GDP fom 2019Q4 to 20204 In Korea L0 Q12 12 2n ng ray 9 Table 4: Consumer Price Index ooccc icc cccccecccececccsecessecesscecseessscseescneecssseneseseceeneeteneeeeneeens 10

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INTRODUCTION

Early in 2020, the COVID-19 epidemic broke out, challenging long-standing economic structures and putting countries under pressure to quickly adjust to new circumstances The Covid-19 pandemic, caused by the novel coronavirus SARS-CoV-2, has had a profound impact on global economies Since its emergence in late 2019, the virus has spread rapidly across the globe, resulting in a global health crisis The WHO declared it a pandemic in March 2020 The pandemic's impact on global economies has been significant and far-reaching Governments worldwide implemented measures such as lockdowns, travel restrictions, and social distancing to contain the virus'’s spread However, these measures resulted in widespread disruptions to economic activities Businesses faced closures, supply chains were interrupted, and global trade experienced setbacks which led to massive job losses and financial strain

Korea's economy is an interesting case study due to its rapid transformation into a world power It has experienced both success and challenges, making it unique among non- G7' nations By using a variety of economic measures as comparisons to examine the performance and recovery of the Korean economy, this study seeks to shed insight into the country's economic experiences both during and after the COVID-19 pandemic We may understand the impact of the pandemic on various industries and the successful outcome of government initiatives in reducing the financial consequences by looking at important metrics like GDP growth, unemployment rates, and inflation rates

This study aims to provide a nuanced picture of the Korean economy's course during the COVID-19 outbreak and its following recovery attempts through a thorough analysis of various economic variables By shedding light on the difficulties encountered, the tactics utilized, and the results obtained, we can draw important conclusions and lessons that will guide future policy decisions, promote economic recovery, and support international efforts to deal with the fallout from this extraordinary catastrophe

* The Group of Seven (G7) is an informal grouping of seven of the world’s advanced economies, including Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, as well as the European

Union

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Introduction to business 49K01.1-E

CHAPTER 1: PRE-PANDEMIC ECONOMIC INDICATORS

As a whole, South Korea's economy was doing rather well until the COVID-19 outbreak The economy of the entire country had been growing steadily, with a heavy emphasis on exports and a positive current account surplus With a strong GDP, South Korea has one of the biggest economies in the world A constant and low inflation rate suggests that monetary policy is being carefully monitored In comparison to many other countries, the unemployment rate was comparatively low, notwithstanding certain obstacles Consumer optimism and the possibility of more consumer spending, which is essential for economic growth, were reflected in the improvement of consumer confidence

2.1 GDP Growth rate

Over the past 30 years, the GDP has increased at an average annual rate of 9.45% in base prices This rapid growth can be divided into multiple discrete time periods Periods of exceptionally rapid economic growth are linked to increased exports, significant investments

in state-of-the-art industrial facilities and technology, and a strong focus on sectors like semiconductors and shipbuilding The years 1986-1989, which saw consistent strong export growth and substantial investments in manufacturing and technology, are among the Korean economy's highest growth periods; the years 1998-2000, which followed the Asian financial crisis and saw extremely high rates of technology investment, are also among them Another phase of strong export growth and semiconductor production was from 2002 to 2007, and following the global financial crisis, Korea saw extremely high rates of export-led growth and

IT technology investment between 2010 and 2011

Ranking 13th globally, the Korean economy has become a prominent player among the newly industrialized nations (NICs) In the 1960s, South Korea was a receiver of help; by the 1990s, however, it had achieved complete independence Due to its rapid economic expansion over the last four decades, it is now a member of the Group of 20 (G20) of industrialized and developing countries worldwide Korea's demographics have changed throughout this period

of time, moving from a high birth rate and huge population to an aging population and becoming an OECD member Korea has also gone through long periods of political unrest marked by multiple military takeovers and administration changes, as well as substantial regional development and urbanization

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2.2 Unemployment rate

While the youth unemployment rate has remained between 8% and 10% since 2003, the number of unemployed youths has been rising as a result of the declining labor force Both the number of full-time students and the involvement of young people in the workforce have been progressively declining in Korea over time Particularly, full-time student unemployment has been rising, which will probably have a negative impact on Korean youngsters' chances of finding work in the future

Before 2020, South Korea had achieved low unemployment for a long time but had

experienced some fluctuations and challenges

© Low unemployment level: Before the COVID-19 pandemic, Korea achieved low

unemployment levels compared to many other countries in the world In 2019, the

unemployment rate in South Korea was estimated to be about 3.8%, according to the

OECD This marks a low and stable level, showing the strength of the Korean economy

before the pandemic struck

® Economic challenges: Before 2020, South Korea faced a number of economic challenges One of the important issues is the gap between labor supply and demand While some

industries require more workers, there are others that have difficulty creating enough jobs for workers This could lead to some unemployment, especially among ethnic minorities

and young people

® Industrial structure transformation: Korea has undergone a process of industrial structure

transformation from traditional industries such as production and manufacturing to high-

tech and service industries This may create changes in the labor market and require some workers to have higher skills and qualifications to adapt to this transition In some cases,

this can create unemployment pressures among labor groups without the right skills

2.3 Inflation rate

The Korea Development Institute (KDI) said that the "Korean" economy faces an increasing risk of weakening due to high inflation and the worsening external economic situation, while consumer spending and investment continue to weaken Declining corporate investment hinders the growth momentum of Asia's fourth-largest economy

Soaring energy and food costs have pushed consumer prices in the second quarter of

2022 in Korea to increase at the fastest rate since 1998 Previously, in 2018, Korea's inflation rate was also maintained at a low According to data, Korea's inflation rate in 2018 was 2.9%

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and in 2019 it was 2.0%, Korea recorded a slowdown in economic growth, and the inflation rate also decreased And in the years before 2020, Korea's inflation rate was below 2%,

CHAPTER 3: IMMEDIATE IMPACT OF COVID-19

3.1 Disruption in supply chains

Due to the COVID-19 pandemic, Korea has suffered from the supply chain disruptions

It has caused serious damage to firms that count on international supply systems (Goodman et al., 2021; Jee & Bae, 2020; Bret, 2020) The worldwide outbreak has increased caution in business, particularly among innovators and start-ups (Tashanova et al., 2020); additionally, intentive manufacturers have struggled to draw in investors (Jee & Bae, 2020) If this tendency continues, Korean business could end up permanently hampered by inadequate investment in innovations (Jee & Bae, 2020) South Korean manufacturers were anticipated to

be driven by their enthusiasm for start-ups and new technology throughout the fourth industrial revolution Investor restriction suppresses innovations, jeopardizing Korea’s dynamic economic future

Much research has focused on how disruptions affect the supply chain and a firm’s competitiveness in the presence of such disruptions (Parast, 2020; Yu et al., 2019; Kamalahmadi & Parast., 2016); in particular, this study is of even greater significance to day,

as disruptions have become the norm during COVID-19 The term disruption has several explanations; however, in the context of supply chain disruption orientation, it refers to a firm’s ability to disassemble fixed supply chains and operations in order to decisively realign supply chains and operations in the face of frequent interruptions (Bode et al., 2011) Strategic orientations examine how an organization's culture promotes strategic decision-making and behavior (Ocasio, 1997) According to the attention-based view, companies focus on a strategic area (e.g., market for market orientation, technology for technology orientation, or innovation for innovation orientation) in order to influence decision-making In the instance

of supply chain disruption orientation, the firm is preoccupied with mitigating the adverse effects of disruptions within the supply chain itself, as well as anticipating for the next set of interruptions (Bode et al., 2011)

3.2 Decline in consumer spending

Lockdowns, social distancing, and stay-at-home orders are a few examples of public health precautions that have been put in place at the local, regional, and national levels These

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policies caused changes in the daily habits of people around the world, gradually transforming powerful socioeconomic models into contactless civilizations Such innovations have had a significant impact on several industrial sectors, especially trade and distribution, education, and business organizations

Table 1: Shopping frequency of Koreans before and after COVID-19

Once in 2 Weeks Once a Week More Than Two

Second, overall spending in the education, food and beverage, and leisure sectors fell as COVID-19 spread However, each of these sectors showed a tendency to recover as the number of confirmed cases diminished The decline in consumption throughout the COVID-

19 pandemic could be attributable to worry, fear of the virus, and demanding self-isolation and social distancing rules The leisure industry accomplished the lowest revenue during periods of social separateness, indicating that policy implementation significantly impacted consumer behavior

Third, the travel industry has been the hardest weakened by COVID-19 Travel spending has declined since the COVID-19 epidemic, and consumption in that sector has not yet begun to rebound as of June 2020 The pandemic has the potential to have the most significant impact on travel-related business organizations

3.3 Increase in government spending

The COVID-19 pandemic in South Korea led to a significant increase in government spending, primarily aimed at bolstering the healthcare system and providing support to businesses This included expanding testing capabilities, acquiring medical equipment, and supporting frontline healthcare workers The government also implemented social safety nets

to assist individuals who lost jobs or experienced income decline due to the pandemic

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The increased spending helped contain the spread of the virus, prevent a complete economic collapse, and provide relief to struggling citizens However, it also brought challenges, such as rising national debt and potential inefficiencies While South Korea managed to keep its debt relatively stable compared to other developed nations, the long-term implications of increased borrowing remain to be seen Some argue that the focus on stimulus spending may have created inefficiencies and hampered long-term economic growth

To ensure fiscal sustainability, South Korea needs to balance managing debt levels with investing in areas like infrastructure and education Analyzing the effectiveness of various spending programs and identifying areas for potential streamlining might be necessary In conclusion, South Korea's increased government spending during the pandemic was a necessary response to an unprecedented crisis, playing a significant role in mitigating the pandemic's impact However, managing the long-term consequences of this spending will require careful planning and responsible fiscal policies Only time will tell if South Korea's gamble pays off in the form of a sustainable and resilient economy

CHAPTER 4: RECOVERY EFFORTS 4.1 South Korea introduced economic stimulus plans to lessen the impact of COVID-19

on its economy

4.1.1 Emergency Disaster Relief Fund:

During the pandemic, the government offered assistance to households with a focus, on supporting low-income families and small business owners The monetary support provided varied based on the size of the family and their income levels

4.1.2 Support for Small and Medium-sized Enterprises (SMEs):

Several measures were put in place to help medium enterprises (SMEs) such as offering financial aid guaranteeing loans and providing tax incentives Additionally, the government urged banks to offer support through liquidity assistance and loan repayment extensions, for businesses facing difficulties

4.1.3 Job Retention and Creation:

The authorities instituted initiatives aimed at bolstering job retention and fostering the emergence of fresh employment prospects These measures encompassed financial aid

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Introduction to business 49K01.1-E provided to businesses to sustain their workforce, in addition to allocation of funds towards public sector occupations and development undertakings

4.1.4 Industry-specific Support:

During the sectors, like tourism, hospitality, and entertainment received tailored aid to cope with the impact This assistance encompassed subsidies, tax breaks, and various financial support initiatives to assist these industries during the times

4.1.5 Tax Relief and Deferral:

Several tax relief initiatives were implemented in order to alleviate the economic strain

on both individuals and businesses These initiatives encompassed tax exemptions, prolongations of submission due dates, and postponements of tax settlements

4.1.6 Healthcare and Social Services:

Additional resources were assigned to enhance the healthcare system and provide backing for frontline workers This encompassed financial allocations towards medical facilities, tools, and staff, along with augmented support for social welfare initiatives aimed at aiding vulnerable communities impacted by the global health crisis

4.2 Monetary policy adjustments of Korea

4.2.1 Interest Rate Cuts

Central banks, like the Bank of Korea, use interest rate reductions as a tool for policy This action aims to decrease the interest rate, impacting borrowing and lending rates across the economy By lowering the benchmark rate commercial banks can borrow money at a cost resulting in reduced interest rates, for individuals and enterprises This is designed to encourage borrowing and spending by making it more appealing, with reduced interest rates

to make it more attractive for individuals and companies Furthermore, when investors seek for larger returns in a low-rate environment, lower interest rates can support the prices of assets like stocks and real estate, boosting consumer confidence and spending Lower interest rates can also lead to currency depreciation, which boosts export competitiveness and promotes economic expansion Additionally, lower borrowing costs help borrowers with variable-rate loans by lessening the stress of debt repayment, which promotes financial stability In general, interest rate reductions are an essential instrument that central banks use

to boost growth and promote the economy, especially in times of economic uncertainty or slump like the COVID-19 epidemic