While the pandemic-hit 2020 was devastating for the global economy,… many experts forecast that there will be some clear improvements this year, largely backed by the progress in vaccination.
The OECD expects South Korea's economy to grow by 2.8 percent in 2020, and the IMF expects 2.9 percent; the outlook is even better for this year.
"Next year, the economy is expected to improve by 3.2 percent, taking into account internal and external conditions, real trends and the effects of policy."
These projections based on the premise that the rollout of COVID-19 vaccines will be successful and complete as soon as possible.
South Korea, of course, has drawn up plans to start distributing vaccines from as early as next month.
South Korean as well as the world economy in 2021 and how the average South Koreans feel now now halfway into the new year.
Our Kim Sung-min is live in the studio for us.
Hello there, Sung-min.
So, you went out on the streets of Seoul to meet and feel whether consumer sentiment matches economic indices?
Hi, Connyoung. Yes, I did. I hit streets of Hongdae, Gangnam and Itaewon to gauge people's sentiment about the current and the future economy.
And as we took it down to the local level, we were able to observe some noticeable gaps.
Q. Real economic impact of COVID-19?
We invested our entire retirement savings in Itaewon. Now that's all gone. Sometimes I make 50,000 Won in a day, sometimes 30,000 Won. I've been trying to hold out but we're closing down on January 20.
I'm only making 10 percent of operating costs. Last year, I was hopeful. But now that it's a new year, we really don't know when the end is. Honestly, I feel hopeless and don't know what to do.
And one of the indicators that can show what these people are going through is the job market index .
Just last month, South Korea's unemployment rate surged to an 11-year high with the number of employed plunging at the fastest rate in over two decades.
The latest data by Statistics Korea shows that the average number of people in employment in 2020 was around 27 million,down 218-thousand from the previous year.
The most job losses last year were in the service industry.
The wholesale and retail sector saw the largest drop, falling by 160-thousand jobs, or by 4.4 percent compared to 2019.
And while there are some economic projections based on the premise that the rollout of the vaccines will swiftly help the economy rebound, many people and businesses think that it will be almost impossible to go back to pre-pandemic levels any time soon.
Q. Expectations for this year?
It's going to take another year or so for the vaccine to settle in. But the small businesses that have already closed down can't be revived. Even with a vaccine, things cannot be turned back.
Honestly, I'm not very hopeful. I don't think things will return to how they were before.
I think this year is going to be more difficult than last year. I don't think the economy is suddenly going to get better. I think things could be chaotic after people get vaccinated.
Experts are saying that this huge gap in expectations is largely coming from the lingering uncertainties due to the COVID-19 pandemic.
"The projection of 3.2 percent by the government does not seem to reflect the third wave of infections. And there could be some base effect since last year was so devastating. So while the economic indices could improve, people's sentiment might not and it will take time until people actually feel that the economy is recovering."
And to help the economy stay afloat and support individuals and businesses that have been hit hard by the pandemic,the government has been rolling out COVID-19 relief funds.
How are other countries doing with their relief payouts?
South Korea's COVID-19 relief funds were first rolled out in September and the third round began rolling out earlier this week.
It is quite similar to other countries as the governments are trying to release cash in the market.
Compared with the U.S. and Japan based on the first round of relief payouts, you can see that Korea and Japan have given the fund to all citizens.
For South Korea the amount ranged from around 365 U.S. dollars per person to up to around 900 dollars for a family with four or more members.
All Japanese were eligible to receive around 900 dollars.
As for the U.S., the first relief was selectively provided depending on several factors including income.
Those who fell into the highest category received up to 1,200 U.S. dollars.
Experts say countries need to continue with the selective support, even though it is impossible to fully compensate the losses from the pandemic.
If we're talking about everybody all together, then there's a good chance that some people got the aide that they didn't need to get. For example this recovery is often called the K shape recovery because some people got hit very badly while other people did not get hit at all and at least for the first relief payment they paid out money to everybody. So most economists I know think that the payment was too small going per person so it really should be concentrated who got hurt by the coronavirusbut I think its impossible to fully compensate all the small businesses and people who lost their jobs."
There's no denying that the COVID-19 pandemic has left a huge dent on the economy.
But in contrast, global stock markets have seen incredible returns for investors in 2020, with the South Korean stock market hitting an all-time high.
South Korea's KOSPI began passing one milestone after another in the last few days of 2020 and into the first couple of days of the new year finally piercing through the psychologically significant the 3-thousand mark for the first time.
Behind this trend was the massive inflow of new individual investors who saw the sudden collapse of stock prices in March as an opportunity to enter the market.
They were also encouraged by low interest rates and the government's policies to support liquidity.
Kiwoom Securities, which has the largest number of private investment customers in Korea, saw around 3.2 million new accounts in 2020, four times that of the previous year.
And it's not just the Korean stock market that's booming.
"Well so we have a month of panic going from late Feb, late March. And then since that the market stabilized and they are very strongly, so been on an upward trend ever since then. Recently, new record was set in S&P 500 on Friday, so with more than regained all the ground that we lost during that initial panic in February and March and now we’re back in full blown market rally."
"Central banks around the world have released a tremendous amount of money into the market to support liquidity. For the U.S., the money put into the market over the past few months exceeded the amount of the past ten years. This has largely contributed to the boom in the global markets,many of them hitting a ten-year high. Countries like India and Brazil that were hard-hit by the pandemic have reached new records."
Where is that gap coming from?
Many people see that as a huge irony but experts explain that stock markets are not necessarily a perfect reflection of the broader economy.
"W"So, if you think about some of the businesses that suffered the most in the pandemic, things like neighborhood restaurants and bars for example, then you are already reflecting to the stock market which tends to be full of bigger, stronger, more international companyOn top that, there are big drivers for the market rallying so hard. One is central bank being so supportive, so the federal reserve and others have pumped trillions of dollars into the market by buying large quantities of bonds and also ?? help drive all the assets prices out."
With low interest rates, people find it meaningless to keep money in banks, but at the same time, the real estate market is overheated at the moment. So as an alternative many have started playing the stock market, resulting into the current rally.
And of course vaccines for COVID-19 could be another game changer for the stock market,with growing optimism that life will soon return to normal.
Will this lead the markets to take wild rides in 2021 as well?
There some diverging opinions. A continuous rally backed up by growing hope for economic recovery is one and another is that the market is overheated.
But still in general, experts assume investors will still be encouraged throughout 2021.
"I expect 2021 to become a very good market because an economic recovery is expected following the pandemic. And technology stocks are forecast to grow rapidly in 2021, further accelerating the rally in the markets."
"Now, there are some who are sending the alarm here, some kind of notable, GMOs for example very notable, top of this bubble, which matches the biggest bubbles in history in terms of proportions. Some people are getting worried by signs of excess in the market things like rally we saw in Tesla, huge surge in coin market, stocks running up. So, there are some people saying that when markets get this exuberant, often that is followed by some kind of quite punishing correction. As far as I know, the broad consensus is keep grinding higher in 2021."
Now, Korea being a heavily export-driven economy 2020 was an especially tough one for exporters especially startups that export their products because they don't yet have a large enough buyer base. How are they surviving?
Normally for exporters, exhibitions are the most important part of their businesses because that's where they can showcase their products, interact with potential buyers and discuss contracts.
They are suffering but they are still finding ways to keep their businesses going.
I met some of those start-up business owners.
50-year-old Hur Young-hui was planning to start exporting his firm's bicycle generators this year.
While his products were innovative enough to win an innovation award at CES, the COVID-19 pandemic meant most in-person exhibitions where he could showcase his products were cancelled.
This has left many global business owners struggling to find export routes.
"Normally, my company attends four or five international exhibitions a year to find buyers. This year, I didn't have the chance to meet anyone in person."."
But this doesn't mean that they are giving up hope.
Now, Hur meets his potential buyers virtually.
Though it is not the same as seeing them in person, he puts all his efforts into creating the best environment for communication.
That means just having an online sales platform is not enough anymore.
Using it as a marketing tool, he has renewed his website and made online pamphlets in multiple languages to connect with buyers better online.
This packaging has also been redesigned to include as much description as possible to help buyers understand the product when they receive a sample.
And Hur is not the only to go through these changes.
Digital transformation to find export routes is becoming a growing trend in this COVID-19 era, reshaping the format of business exhibitions and conferences. Using cutting edge technology like racing drones, VR, AR, and XR, virtual visitors can explore exhibitions as if they are at the actual venue.
"We are quickly adjusting to the changing situation amid the pandemic and most exhibitions had to be switched online. Now it has become much more common, with virtual meetings being the most well-established part."
Just by simply clicking on the booth, visitors can get the sellers' contact details and information about their products.
Since virtual exhibitions are not limited by time or place, they can be held 24-7, opening up more opportunities for companies.
Such digital transformation in this difficult time is in fact a growing trend all around the world,as even the largest global exhibitions like the Consumer Electronics Show are going all-digital this year.
And this has allowed more Korean startups to participate in the show this year.
"Korea has a great group of start-ups that have come to CES. There's 135 start-ups from South Korea. And there's little over 600 start-ups from all over the world participating. So, I think that's always an interesting place to find new companies and new technologies."
Among those are South Korean healthcare startup M2S, which is at CES with its Best Of Innovation award winning product, VROR EYE Dr.
Using AI and VR techniques, people can analyze their eyesight at home as well as receive treatment.
The virtual space created by VR allows various tests and treatments to be done in a small space.
Another start-up 'NUVI Lab' has developed an artificial intelligence food scanner.
When you scan the food, you can find out the nutritional information and how many calories you are consuming.
It also collects data about how much food is wasted. With that information, we can reduce food waste or offer personal healthcare services.
90 scanners have already been installed across the country, and the company is also developing a mobile application.
Though accelerated by the pandemic, it is clear that the digital transformation in the export industry could become a positive change in the post COVID-19 era, making it easier for firms to enter the global marketplace. Thank you Sung-min.