Korea’s economy won’t recover overnight

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Korea’s economy won’t recover overnight

The government admitted Monday that a sharp recovery, such as those the country experienced after two recent epidemics that sickened thousands in Korea, is unlikely to happen with the current coronavirus pandemic.

Vice Finance Minister Kim Yong-beom painted a gloomy picture of Korea’s economic outlook during a government meeting, questioning whether even flat economic growth would be achievable regardless of how quickly the ongoing outbreak comes to an end.

In the cases of severe acute respiratory syndrome (SARS) in 2003 and the Middle East respiratory syndrome (MERS) in 2015, global infections spread to Korea, causing local market drops and temporary slowdowns of the domestic economy. But in both cases, the economic impacts were relatively short-lived.

“We expect that a so-called ‘V-shaped’ recovery, which happened in past contagious disease cases, won’t be easy, let alone a ‘U-shaped’ one,” Kim said. “Furthermore, there’s a growing concern in the local and overseas financial markets on even an ‘L-shaped [recovery].”

Kim said the government is focusing on risk management in the financial and foreign exchange markets, including Friday’s announcement of a six-month ban on short selling.

“The government has strengthened inspection and management of foreign currency liquidity by stabilizing the foreign exchange market and related institutions, including the swap market,” he said.

The vice finance minister added that the government will act “swiftly and firmly” to prevent the won-dollar exchange from depreciating sharply due to speculative investments aimed at profiting from market instability.

He also said the government will focus on protecting the livelihood of the average Koreans.

“The Covid-19 [coronavirus] is expanding to a global infection crisis that is unprecedented,” Kim said. “The shock on the global economy following from the sharp decline in economic activities caused by Covid-19 is now an established fact.”

In addition to the government’s 11.7 trillion won ($9.5 billion) supplementary budget proposal, Kim said the government will continue to enact additional measures to help businesses.

The Ministry of Employment and Labor has announced that it will provide support for tourism-related industries, including lodging transportation and entertainment, through Sept. 15.

The measures include raising the government’s coverage of paid leave from the current rate of 75 percent to 90 percent and raising the maximum monthly government subsidy for businesses to maintain employees from 66,000 won per employee to 70,000 won per employee.

Companies in the tourism industry will also be able to suspend payments for employment insurance and work-related injury insurance.

The living-expenses loan program for employees in those industries will also double to 20 million won. The government’s student-loan program for those employees will increase its maximum loan per recipient to 7 million won, from a current ceiling of 5 million won.

Based on January’s employment insurance payment, the government estimates 13,845 companies and 171,476 employees will benefit from the support.

The Korean government since the outbreak of the infection virus has tried to prevent it from spilling over to the real economy.

Before the number of people confirmed with the virus significantly jumped in mid-February, the government, including the Blue House, encouraged people to continue dining out to support small businesses, especially as tourists from China stopped visiting.

Finance Minister Hong Nam-ki at the time assessed the slowdown in economic activity as the result of “excessive fear and anxiety.”

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]
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