Macroeconomic developments: How has COVID-19 affected South Korea’s economy?In its early stages, private consumption and the labor market were heavily affected by the pandemic. Contact restrictions and social distancing measures dampened private consumption, with real household spending declining, particularly in the areas of transportation, accommodation, and cultural activities. This was followed by a sharp drop in demand in the service sector, most notably in the hospitality, travel, and logistics industries. The unemployment rate rose to four percent in 2020, with young people hit the hardest. Youth unemployment jumped to nine percent in 2020, while the extended unemployment rate, which includes underemployed youth not covered by the unemployment rate, was nearly three times higher.
While these indicators improved somewhat over the course of the pandemic, the rapid recovery of Asia's fourth-largest economy was largely due to strong export performance since the end of 2020. In May 2021, South Korea's exports posted their strongest growth in 32 years, surging by 45.6 percent year-on-year. This growth was driven primarily by the information and communications technology (ICT) sector, with the export volume of semiconductors reaching an all-time high in 2021.