COVID-19 Pushes South Korea Into Recession

Despite its capable handling of the pandemic overall, South Korea has not been able to escape the global economic fallout.

Despite avoiding the need to enact the lockdowns that have significantly impacted economies in Europe and the United States, South Korean has not been able to avoid a COVID-19 induced recession.

With second quarter GDP shrinking 3.3 percent from the previous quarter, the South Korean economy entered a technical recession for the first time since 2003 and its steepest decline since 1998. The second quarter decline follows a 1.3 percent decline in GDP in the first quarter.
GDP mostly declined on weak demand for South Korean exports, which account for around 40 percent of GDP.

Eastar Air’s fate is now uncertain, and other low cost carriers face either bankruptcy or mergers in the future. Domestic passenger traffic was down 38.1 percent and international routes 97.9 percent in June compared to the same period last year. Without the return of international routes the low cost carriers are not sustainable on domestic travel alone.
Traditional carriers have faced challenges as well. Asiana Airlines was set to merge with HDC Hyundai Development, but HDC Hyundai has called for a new due diligence study of the merger due to the rapid increase of debt by Asiana since it had agreed to buy the carrier in December. If those talks fail, the government could inject additional funds for convertible bonds that would in essence nationalize the carrier.

This article was written by Troy Stangarone

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