Despite the unprecedented economic crisis triggered by COVID-19, the contraction of South Korea’s economy will remain limited due to its effective strategy to contain the spread, according to the Organization for Economic Cooperation and Development.

Also, while recognizing the record-low performances anticipated for the second quarter, the Paris-based organization predicted that the global economy will enter a slow and gradual recovery by the latter half of this year.

“The South Korean economy will contract 1.2 percent on-year in 2020 in case no further mass infections take place and 2.5 percent in case of a double hit,” the Ministry of Economy and Finance said, citing the OECD’s latest Economic Outlook report.

“Due to an effective strategy to contain the spread of the virus, the government limited the damage to the domestic economy and output is shrinking less than in any other OECD country.”

The OECD conventionally issues its biannual Economic Outlook report in May and November each year to suggest its perspective on the global economy, as well as an Interim Economic Outlook report in March and September to review the respective growth outlook for major economies.

Taking into account the exceptional uncertainties due to the ongoing epidemic crisis, the OECD has adopted two plausible scenarios in its latest report, depending on the development of the virus, the ministry said.

While the “single-hit scenario” assumes that the epidemic curve will eventually shrink within the year, the “double-hit scenario” is built on the possibility that it will surge again around October-November.

Under the single-hit scenario, the world economy will likely contract 6 percent on-year in 2020 and 5.2 percent in 2021, according to the OECD outlook. The double-hit scenario suggests that the global economy will contract further by 7.6 percent on-year in 2020 and 2.8 percent on-year in 2021.

“Due to the unprecedented COVID-19 crisis, the global economy in 2020 is undergoing the most serious recession since the Great Depression in the 1930s,” Seoul’s ministry said, citing the OECD report.

“(But) under either scenario, the economy will mark a slow and gradual recovery by 2021, after hitting the low point during the second quarter.”

It also viewed the Korean New Deal -- Seoul’s initiative to build on digitalization and green growth projects to foster economic revival -- as a plausible momentum to trigger higher investment and employment.

Expressing some concerns on the dampened private consumption and mounting unemployment here, the OECD suggested that the government prolongs its fiscal support for households and small-sized businesses, referring to the country’s disaster relief funds and extra budget bills.

By Bae Hyun-jung (tellme@heraldcorp.com)