This paper explores the impact of the COVID-19 pandemic and fiscal policy interventions on the Korean and global economy to provide a scientific rationale for government policy interventions. We deployed a multi-region, multi-sector computable general equilibrium (CGE) model and the Global Trade Analysis Project (GTAP) database version 11A, with 2017 as the base year projected to 2020, the epitome of the COVID-19 pandemic. Two policy scenarios assessed the impacts of the pandemic and government fiscal stimulus interventions. Results indicated a global decline in real GDP and welfare, with supply chain disruptions and increased trade costs negatively affecting import and export volumes. Despite government fiscal measures boosting real GDP, Korea's economy contracted by 1.47% in 2020, deviating from its annual pre-pandemic growth of approximately 2%. Welfare losses reached US$57.38 billion, driven by decreased consumer spending and increased unemployment. Falling export and import volumes narrowed the trade deficit to US$197.04 billion. However, government fiscal measures led to a net impact of US$104.68 billion compared to the baseline scenario. Our study underscores the need for targeted budgetary measures to mitigate adverse effects, recommending policies to stimulate private household consumption, support affected sectors, and enhance Korea's international trade competitiveness.
History
