South Korea’s impressive recovery in recent quarters has largely been driven by exports and the manufacturing sector, which have both exhibited rapid growth. Exports, in particular, have grown swiftly, with YOY growth in the last four months over 30%. Consumption recovery has been more gradual, as several outbreaks of COVID-19 have imposed significant restrictions on consumer mobility. 

Our View

The two-paced nature of economic recovery in South Korea will continue through the end of 2021. The industrial sector will continue to perform well as global demand for Korean exports supports manufacturing activity. Consumption, on the other hand, will continue to be restrained by the effects of the pandemic, as the country experiences high infection rates and struggles to secure adequate vaccine supplies. The outlook for domestic demand will improve in Q1 2022, when rising vaccination rates allow for a more sustainable reopening of the economy.

Business Implications

Demand planning for offline channels will be a challenge for B2C firms through the end of the year. Firms should strengthen communication with local teams and build flexibility into supply chains to swiftly respond to changes in consumer demand. Companies with established online channels will experience greater stability in demand in the coming months, as Korean consumers opt for digital channels wherever possible. B2B firms serving consumer-focused industries will encounter greater price sensitivity in the coming months. In contrast, demand from manufacturing and export-oriented firms is likely to remain strong for the rest of the year. 

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