Sagging exports and global trade tensions pulled South Korea’s annual growth rate last year to its lowest level since 2009, but a surge in government spending may have given the economy a boost in the last three months of 2019.
The slowdown comes as President Moon Jae-in’s administration increases fiscal spending and as the Bank of Korea (BOK) considers further stimulus to shield the economy from a global slowdown.
The gross domestic product (GDP) increased by a seasonally adjusted 1.2 percent in the fourth quarter of 2019 compared with the previous three months, the BOK said on Wednesday.
It was the fastest expansion since the third quarter of 2017 and outperformed the median estimate of 0.8 percent in a survey by Reuters news agency.
“Government spending definitely was a boost as exports was a drag,” said Park Chong-hoon, an economist at Standard Chartered Bank in Seoul. “The prospect for exports is better this year with the US-China signing of the trade deal, and as China continues with its expansionary fiscal policies.”
Robust government spending on public infrastructure combined with better private consumption improved growth in the fourth quarter, but that did little to help exports, which made no contribution to the 1.2 percent expansion.
In the fourth quarter, private consumption increased 0.7 percent from three months earlier while construction investment jumped 6.3 percent.
Exports declined 0.1 percent in volume terms, reflecting the extended slump in shipments, which declined for a 13th consecutive month through December in year-on-year terms.
For the whole of 2019, the economy grew by 2 percent, the slowest pace in 10 years and matching the central bank’s projection.
“Of the 2 percent, the net government contribution to growth came to 1.5 percentage points, the biggest portion since 2009 but that didn’t change the fact that it was a hard year for Korea in terms of exports,” a central bank official said.
In a press briefing held after the GDP data release, another BOK official said the outbreak of a virus from central China has emerged as a fresh risk that could hurt consumer spending.
“With the case of the Middle East Respiratory Syndrome (MERS), people didn’t go out much and travelled less, so spreading of the new virus may shrink consumption in that regard,” Park Yang-su, a director general at the BOK, said in response to a question about the virus.
South Korea in 2015 drew up a supplementary budget to help the economy cope with the effects of the outbreak of the MERS.
The virus in China, originating in the central city of Wuhan at the end of last year, has spread to Beijing, Shanghai and elsewhere, with cases also confirmed in the United States, Thailand, South Korea, Japan and Taiwan.
Nine deaths and 440 cases had been reported as at Wednesday morning in Asia.
Reuters news agency
Palestinian Economy Hit Hard by Virus Needs Aid, World Bank Says – BNNBloomberg.ca
(Bloomberg) — The Palestinians will need outside help to overcome a poor economic outlook and widening budget deficit made far worse by the Covid-19 pandemic, according to a new World Bank report.
Already facing a growth slowdown and sizable deficit, the West Bank and Gaza Strip could see output shrink between 7.6% and 11%, depending on how fast the economy recovers from the virus, the World Bank said in its report published on Monday. President Mahmoud Abbas’s Palestinian Authority may watch its fiscal gap roughly double to more than $1.5 billion this year, and will need significant aid to restore growth and solve budgetary issues, the bank added.
“Several years of declining donor support and the limited economic instruments available have turned the ability of the government to protect livelihoods into a monumental task,” Kanthan Shankar, World Bank country director for the West Bank and Gaza, said in a release. “External support will be critical to help grow the economy during this unprecedented period.”
After economic expansion cooled from 8.9% in 2016 to just 0.9% last year, the pandemic forced World Bank officials to cut their 2020 expectations from a previous 2.5% increase. Restraints on movement helped to contain the spread of the disease but also hurt activity and government revenue.
In total, there have been more than 430 confirmed cases of the novel coronavirus across the West Bank and Gaza, with three deaths.
Israel, which occupies the West Bank and blockades Gaza along with Egypt, is loaning the Palestinian Authority as much as 800 million shekels ($227.8 million) over the coming four months to help make up for the loss of tax revenue. The rare deal is meant to ensure funding for hospitals and other key services.
World Bank officials focused on recommendations to upgrade the Palestinian telecommunications sector in cooperation with Israel, in order to further develop the digital economy. Israel maintains a tight grip on broad aspects of the Palestinian information and communications technology sector.
Tensions between Israelis and Palestinians are rising as Prime Minister Benjamin Netanyahu promises to move forward this summer with annexing West Bank territory viewed by Palestinians as the heart of their future state. Palestinian leaders have promised to end all forms of cooperation with Israel in protest.
Now That He Can Annex West Bank Land, Will Netanyahu Do It?
©2020 Bloomberg L.P.
People more important than the economy, pope says about Covid crisis – The Guardian
By Philip Pullella
VATICAN CITY (Reuters) – Pope Francis said on Sunday that people are more important than the economy, as countries decide how quickly to reopen their countries from coronavirus lockdowns.
Francis made his comments, departing from a prepared script, at the first noon address from his window overlooking St. Peter’s Square in three months as Italy’s lockdown drew to an end.
“Healing people, not saving (money) to help the economy (is important), healing people, who are more important than the economy,” Francis said.
“We people are temples of the Holy Spirit, the economy is not,” he said.
Francis did not mention any countries. Many governments are deciding whether to reopen their economies to save jobs and living standards, or whether to maintain lockdowns until they are sure the virus is fully under control.
The pope’s words were met with applause by hundreds of people in the square, many of whom wore masks and kept several meters from each other. The square was reopened to the public last Monday. Normally tens of thousands attend on a Sunday.
The last time the pope delivered his message and blessing from the window was March 1, before Italy, where more than 33,000 people have died from the virus, imposed a lockdown. The last restrictions will be lifted on Wednesday.
Francis led the crowd in silent prayer for medical workers who lost their lives by helping others.
He said he hoped the world would come out of the crisis more united, rather than divided.
“People do not come out of a crisis like this the same as before. We will come out either better or worse than before. Let’s have the courage to emerge better than before in order to build the post-crisis period of the pandemic positively,” he said.
(Reporting by Philip Pullella; Editing by Susan Fenton)
ANC Looks for New Levers to Boost South Africa's Economy – BNNBloomberg.ca
The head of economic transformation in South Africa’s ruling party proposed a range of measures to bolster the economy, ranging from encouraging the use of pension funds and the central bank to finance infrastructure spending to the creation of a state bank and pharmaceutical company.
Enoch Godongwana’s recommendations to the African National Congress come as the government tries to revive an economy devastated by the coronavirus pandemic.
“The Covid-19 shock is posing unprecedented challenges, the economic crisis entailed by the pandemic is unique,” Godongwana said in the May 22 document seen by Bloomberg. “Globally, central banks have reverted to their original role as bankers to their governments.”
While business and investors have been calling for strong government action to support Africa’s most-industrialized economy, the document may heighten concerns about state intervention and so-called prescribed investment — mandatory funding by private companies of certain sectors.
In the document, Godongwana proposed changing regulation 28 of the Pension Funds Act to boost the funding of infrastructure projects spearheaded by state development finance institutions using private capital. South Africa’s main state-owned DFIs are the Industrial Development Corp. and the Development Bank of Southern Africa, of which Godongwana is chairman.
He also suggested that the Reserve Bank help finance DFIs through the creation of a 500 billion-rand ($29 billion) fund. Money should also come from the Public Investment Corp., a 2.13 trillion-rand fund manager that oversees civil servants’ pensions, Godongwana said.
“While it faces increasing continental competition, the South African financial-services sector can rightly be said to endow our emerging-market nation with ‘the financial plumbing of a rich place’ with deep, liquid markets,” he said.
While the document is a break with the thinking of some ANC leaders that the state should be responsible for much of the investment in the economy, it does advocate increased government “guidance.”
“A narrow and flawed understanding of what the developmental state is has led to the erroneous conclusion that it is only about public investments and public ownership, with a related over-emphasis on the limited funds of the state,” he said. “A developmental state does not necessarily mean higher levels of state ownership, but high levels of guidance.”
In an interview with Johannesburg’s Business Times, which reported on the document earlier, Godongwana said the proposals didn’t amount to advocating for prescribed assets. They merely meant that regulations should be changed so that pension funds can invest in DFI’s if they wish to.
Godongwana didn’t answer a call to his mobile phone. Neither did Pule Mabe, the spokesman for the ANC.
The document also proposed the formation of a state bank, a pet project of Finance Minister Tito Mboweni, and a national pharmaceuticals company.
It also advocated, in contrast to the drive of some government departments, a swift move away from coal-fired energy to renewable power. The state-owned Central Energy Fund should be used to partner private investors in new projects, Godongwana said.
©2020 Bloomberg L.P.
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