Jan. 25, 2021, 9:16 p.m. EST

South Korea's economy slips by most in two decades

By Kwanwoo Jun

South Korea's economy contracted 1.0% in 2020--the worst performance in more than two decades--after its recovery lost steam in the final quarter on a resurgence of coronavirus cases.

Gross domestic product grew 1.1% during the October-December period from the prior quarter, following a 2.1% expansion on-quarter during the July-September period, showed preliminary Bank of Korea data on Tuesday.

The weaker growth data let the country, Asia's fourth largest economy, log its weakest annual performance since 1998 at the height of the Asian financial crisis.

The latest reading--above the median forecast of 0.6% growth by economists polled by The Wall Street Journal--suggests that a new wave of Covid-19 cases challenges--though not derails--the export-driven recovery recently in the country. Stricter social distancing is in place to help curb the pandemic but also weighs on business activities and consumer spending.

The central bank data showed private consumption fell significantly in the fourth quarter while exports jumped on brisk demand for semiconductors and petrochemicals.

Year-on-year, the economy shrank 1.4% in the fourth quarter following a 1.1% contraction in the previous quarter. The median market forecast was for a 1.6% contraction in the final quarter.

The South Korean economy is viewed as remaining on track for a recovery, as the country ramps up fiscal and monetary stimulus.

The bank expects the economy to expand 3.0% in 2021.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com

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