GDP outlook cut, export support is being offeredAs the number of people infected with the coronavirus grows rapidly in Korea, credit rating agencies are slashing 2020 growth forecasts for the country.
The revisions have been rolling in all week.
On Sunday, Moody’s lowered its outlook from 2.1 to 1.9 percent. Fitch Ratings Tuesday cut its forecast from 2.5 percent to 2.2 percent.
Yesterday, S&P came in with the most dramatic revision, taking its estimate for 2020 GDP growth from 2.1 percent to 1.6 percent.
To counter the economic weakness caused by the outbreak, the government continues to provide support.
It is offering 260.3 trillion won ($216 billion) in trade finance this year to exporters to carry them through the coronavirus crisis. The trade support is 3.1 trillion won more than the initial plan and 28.1 trillion won more than in 2019.
The government said 156 trillion won will be spent in the first half, and 105 trillion won will be supplied to smaller companies.
The application process will be sped up, with 80 percent of trade insurance being paid up front for small companies and shortening payment times for others from two months to one month.
The government said it will spend 511.2 billion won for export marketing, which is a 14.4 percent increase from last year. It added that it will push for the overseas exhibition of Korean products and the sending out of trade delegations. Events will be held in Southeast Asia and in nearby northern countries, including Russia, Mongolia and Central Asian nations.
The government will increase incentives to companies operating abroad and returning operations to Korea, including cutting corporate taxes, offering subsidies for facility investment and supporting research and development.
The National Tax Service said it will extend the deadline for the payment of corporate taxes, which are normally due on March 31, and the payment of value-added taxes for companies that have been affected by the coronavirus outbreak.
“Until the beginning of the year, there were expectations of the economic situation improving, based in part on global economic recovery,” said Prime Minister Chung Sye-kyun, during the cabinet meeting held Thursday. “However, not only has investment shrunk, but so has the domestic market. Exports especially are struggling.”
Last year, at the beginning of the year, President Moon Jae-in announced Korea’s goal on exports, with the aim to make Korea one of the top four exporters globally by 2030.
While exports for the first time in a decade fell by double-digits in 2019, and fell for 14 consecutive months through January, the government noted that the rate of decline went from double digits to single digits in December and January.
The government had high hopes for a rapid recovery of semiconductor exports, which account for 20 percent of Korea’s outbound shipments.
“We will definitely achieve an export recovery through full support, including support of exports through marketing and the offering of 240.5 trillion won in export finance,” Finance Minister Hong Nam-ki said on Jan. 20.
Doubts are on the rise about the possibility of a fast recovery following the outbreak of the coronavirus in Wuhan, China.
China takes one-quarter of Korea’s exports. That’s a sharp increase. In 2003, when severe acute respiratory syndrome broke out, exports to China were only 18 percent of the total.
Airlines, tourism and the retail industries have been heavily affected by the outbreak, which now has killed more than 2,000 people in China.
Manufacturing has also been hit as production lines have been stopped due to the lack of parts coming from China.
Samsung Electronics, the country’s largest company, is seen affected by the outbreak.
While the company has no smartphone manufacturing in China, it has been expanding its semiconductor production in the country.
Apple earlier this week announced that the supply of iPhones would be “temporarily affected” by the outbreak. More than 90 percent of the company’s smartphones are produced in China.
“With the free trade order represented by the [World Trade Organization] showing cracks, the trade conflict between the United States and China, Japan export restrictions and [the coronavirus], we must rethink the global value chain, which was founded on efficiency,” Minister of Trade, Industry and Energy Sung Yun-mo said. “We expect a wise resolution amid the spread of [the coronavirus] as we successfully did in countering Japan’s export restrictions, with relevant government departments and institutions working as one team.”
BY LEE HO-JEONG [firstname.lastname@example.org]