The economic impact of the pandemic in South Korea
Mitigation Measures
South Korea has managed to control the spread of COVID-19 through a rapid detection strategy based on lessons learned from the MERS outbreak in 2015. The government, in collaboration with private companies, developed and distributed free testing kits en masse, establishing 633 detection points and adopting innovative methods. In addition, a policy of information transparency was implemented, tracking and publishing the location and movements of those infected to alert the population, although generating debate about privacy. Social distancing, technological support for public information, and price control of medical supplies complemented these measures. Thanks to this combination of strategies, South Korea has maintained one of the lowest COVID-19 mortality rates in Asia, serving as an example for other countries on the importance of early detection, transparent information management, and citizen cooperation in the fight against the pandemic.
Controlling COVID-19
South Korea managed to control the spread of COVID-19 through a series of effective measures, including a massive testing campaign, contact tracing, and without the need for a complete lockdown of cities. Authorities implemented quick and efficient actions to isolate and treat those infected. In addition, South Korea kept its public transportation and other areas of daily life relatively virus-free. Although it returned to a “new normal” with precautions such as temperature checks before entering public events, the country remained cautious and prepared for future outbreaks.
Economic impact:
In response to the global recession triggered by the COVID-19 pandemic, the world economy experienced a contraction, including South Korea, whose export-oriented economy suffered a 1% decline in 2020, the largest in 22 years, but better than other developed economies. However, the country began to recover in 2021, especially in exports of chips and technological devices, which improved GDP growth forecasts. This recovery was expected to continue for the rest of the year, with growth projections of 3.2%. This analysis was based on statistical data from international organizations such as the World Bank and the International Monetary Fund.
Implemented Measures:
South Korea implemented a proactive strategy to contain COVID-19, with a massive application of 20 thousand daily tests and a network of laboratories deployed throughout the country. Despite initially being one of the countries with the most cases, they managed to reduce the mortality rate to 0.8% in less than a month. This rapid response included the closure of schools and places of agglomeration, as well as the implementation of distance learning and teleworking. The focus on early detection and isolation of those infected has been fundamental to containing the outbreak, and public-private partnerships have allowed for testing in large numbers. Lessons learned from previous epidemics, such as MERS in 2015, also influenced the South Korean government's response. Although budgetary challenges persist, South Korea's experience highlights the importance of coordination between sectors and effective communication in dealing with the pandemic.
Economic Recovery:
South Korea is implementing measures to revitalize its economy after the impact of COVID-19. They have announced a stimulus plan of over 13 billion dollars, aimed at supporting affected small and medium-sized businesses and providing funds for health care. In addition, an Emergency Economic Council has been established for faster and more efficient decision-making. These initiatives aim to revive the economy and mitigate the negative impacts of the virus, aligning with the Sustainable Development Goals to promote sustainable economic growth and full employment.
Development of the real estate market in Seoul
Evolution of the Real Estate Market:
In South Korea, the Jeonse property rental system has been central to the real estate market since the 1960s. However, recent government legislation aimed at protecting Jeonse tenants has created negative repercussions in the market. The popularity of the Jeonse system has declined due to factors such as inflation and government regulations, leading to a drop in property prices and a decline in confidence in the real estate market. Property owners are facing financial difficulties due to declining Jeonse income. This situation, combined with changing consumer trends and global economic pressures, has brought the Korean real estate market to a critical situation.
Residential Market Diversity:
·Housing Types:
Hanoks, the traditional Korean houses, stand out for their intelligent design adapted to the natural environment. They use the “ondol” heating system with radiant heat slabs for winter and the “maru” structure for ventilation in summer. Roofs are covered with vibrantly colored tiles. Although Koreans today prefer to live in modern buildings, they still retain elements of “ondol” in their heating systems, modernized with hot water instead of hot air. This system has transcended to other countries with similar climatic variations.
Trends and Buyer Preferences:
South Korea's residential real estate market is estimated at $345.19 billion in 2024 and is projected to reach $637.92 billion by 2029, with an annual growth rate of 13.07%. This growth is attributed to housing demand and apartment construction due to land shortages. The COVID-19 pandemic has significantly impacted the market, with a decline in apartment sales in Seoul. The government has taken steps to increase housing supply, easing regulations and supporting redevelopment projects. High-rise apartments are the most common, although single-family homes are gaining popularity. Urbanization is a key driver of the market, with challenges such as housing affordability and the need for a more diverse offering. Companies such as Hyosung Corporation and Dongbu Corporation are leaders in the market, which is fragmented with regional and local players, as well as some global companies.
Real Estate Market Challenges:
South Korea's real estate market faces several significant challenges. One of the main ones is the rental system called Jeonse, introduced in the 1960s, which has been popular but is now causing problems due to legislative changes. Low birth rates and depopulation make the situation worse by reducing demand for housing. In addition, South Korea is a net importer of food and energy, which adds economic pressure. Property prices have risen consistently over the past decades, but have recently shown signs of falling, negatively affecting Jeonse contracts. Declining interest rates and inflation also complicate the situation for landlords, who are increasingly reliant on property values for profits. Demographics are shifting towards an older population and less taxes, affecting the economy and confidence in the real estate market. This shift affects landlords who own multiple properties, which could lead to a crisis in the real estate market in the near future.
Despite having an economy based on technology and education, the country faces demographic challenges, such as a low birth rate and an inverted population pyramid, which affects housing demand. With approximately 80% of citizens' wealth invested in real estate, changes in the real estate market have a direct impact on the economy.
International trade and trade agreements in Korea
South Korea’s Transformation of International Trade
South Korea has undergone a remarkable economic and social transformation over the past six decades, moving from being one of the poorest nations to becoming the world’s 14th largest economy and an international benchmark in multiple aspects. Its success is largely attributed to the development of human capital, especially through an exceptional education system that has prioritized equity and meritocracy. Confucian culture, centered on education and meritocracy, has played a crucial role in this process. South Korea leads the world rankings in education, with high scores on international tests such as TIMSS and PISA. The country has invested in teacher training, promoting a merit-based teaching career and providing resources for lesson preparation. In addition, it has implemented cutting-edge educational technology and public policies to subsidize the supply and demand of books. These strategic efforts have contributed significantly to South Korea’s educational and economic success.
South Korea Trade Agreement
South Korea has signed a free trade agreement with Panama, Honduras, Nicaragua, El Salvador and Costa Rica, becoming the first Asian country to do so with five Central American nations. This agreement will facilitate the access of Central American products to the South Korean market and of South Korean products, such as vehicles and electronics, to the region. The agreement, which will eliminate tariffs on most goods, is expected to especially benefit the agricultural, marine and textile sectors of Central America, as well as the flow of technological and automotive goods from South Korea.
Challenges in International Trade
Korea faces various economic and demographic challenges, including the need to maintain its competitiveness against new competitors such as China and India, as well as redefine its alliances in the Asian region. In addition, Korea faces an aging population, with projections indicating a significant increase in the elderly population by 2050. Low fertility rates and low female labor force participation are key concerns, requiring changes in retirement and labor force policies to encourage female labor force participation and retain older workers. This presents an opportunity for cooperation between Korea and Latin America, especially in areas such as child care, maternity and paternity leave, and the creation of quality jobs.
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