Gov’t execute budget to prevent spread of virusThe government said it will swiftly execute budget needed to prevent the spread of the Wuhan coronavirus while coming up with measures that will minimize the impact on the local economy and the financial market.
Finance Minister Hong Nam-ki on Monday held an emergency meeting with top government officials where he said the government is preparing to provide substantial budget support in a timely manner to ensure that Korea takes enough precautionary measures.
“Preemptive measures in preventing the spread of the new coronavirus in Korea are most important,” Hong said.
He added that the government will launch quarantine and curative measures with already secured budget and that it will set aside extra funds if needed.
Although visible effects on the economy are yet to be seen from the fast spread of the coronavirus, Hong said the government has initiated a thorough investigation into the possible negative outcomes that may arise from the increasingly spreading infection.
Since the first patient infected with the virus was reported on Jan. 24, which was the start of the Lunar New Year holidays, fears of the virus becoming a pandemic have heightened sharply, especially with the confirmation of the fourth case in Korea on Monday.
The coronavirus has infected more than 2,700 people in 14 countries and caused 80 deaths worldwide.
Despite the Lunar New Year holiday being a high season for many retail businesses, people have started to avoid places with large crowds.
A 45-year-old woman, who runs a small business at Lotte Tower in Jamsil, southern Seoul, said she had to close her shop early on Lunar New Year, which usually sees a large number of visitors, because of how few patrons she had.
The news that the third person who was confirmed to be infected with the virus in Korea had been roaming around Gangnam since his return from Wuhan is likely to further raise people’s fears of going to populated areas.
This is not the first time Korea has seen its economy affected by a virus outbreak.
According to a report from the Korea Institute for International Economic Policy released last week, the severe acute respiratory syndrome (SARS) outbreak, which also originated from China, caused Korea’s GDP growth rate to lose 0.25 percentage points in 2003.
As Korea started witnessing confirmed cases of SARS in 2003, domestic consumption started to sag. The country’s private spending shrank 0.4 percent in 2003 compared to the previous year, even without a major financial crisis. Just one year earlier in 2002, the consumption index posted robust 8.9 percent growth.
In 2015 during the Middle East respiratory syndrome (MERS) outbreak, Korea’s economy is estimated to have dropped 0.2 percentage points on its economic growth.
As China takes up 26.8 percent of Korea’s export, some have pointed that the Wuhan coronavirus could act as another sedative for Korea’s exports to China, which have already suffered last year amid trade tensions between Washington and Beijing.
Travel industries are already braced for disappointing months ahead.
Earlier this month, the Korea Tourism Organization forecasted the number of Chinese visitors to Korea to rise 25 percent from last year to around 7.5 million due to a large number of group tours throughout the Lunar New Year holidays.
But the outbreak of the new virus has already been hurting Chinese tourists’ activities and caused some local airlines to suspend their operations to China.
The South Chungcheong government said Sunday that it canceled the tour plan it coordinated with local tourism agencies for 3,000 Chinese tourists to the province.
Although it was known that most of the tourists were from areas in China far from Wuhan, the provincial government said it canceled the tour after locals expressed worries of the virus spreading into the territory from the Chinese tourists coming between late this month until the end of February.
The tourism industry is also seeing a large number of its customers canceling their trips to China.
On Thursday, Hanatour reported a 20 percent increase in the number of cancellations of trips to China for January and February compared to a year earlier. Interpark Tour said 15 to 20 percent of all bookings to China between January and March were canceled.
The number of canceled trips to China has surpassed 1,000, a big number considering the fact that Korean tour companies typically send 10,000 tourists to China each month.
Korean Air stopped flights to Wuhan through Jan. 31, while low-cost carrier T’way Air postponed the launch of the Incheon-Wuhan route which was set for Jan. 21.
The coronavirus is also threatening the revenue for local duty-free stores that recently saw explosive growth in sales backed by the large spending of foreigners.
The aggregate sale for duty-free stores in Korea rose 43 percent to 2.28 trillion won ($1.93 billion) in December last year from 1.6 trillion won posted in the same month a year earlier. During the SARS outbreak in 2003, duty-free shops saw their sales drop as much as 20 percent due to the decreasing number of foreign tourists.
During the emergency meeting Monday, Hong also said that the government will thoroughly prepare for any turbulence in financial markets from the spread of the virus.
Investors have been taking a risk-off approach over the potential fallout from the outbreak of the coronavirus that has been actively spreading across the world.
By the end of Thursday, the main bourse Kospi fell 21.12 points, or 0.93 percent, to 2,246.13 while the secondary Kosdaq was down 2.68 points, or 0.39 percent, to close at 685.57.
The Korean stock market is reopening Tuesday after a four-day break from Friday last week to Monday due to the celebration of the Lunar New Year.
BY KO JUN-TAE [firstname.lastname@example.org]