Economic warning signsDark clouds are hanging over Korea Inc. amid the coronavirus outbreak. Following dwindling consumption and investment, exports have declined by a whopping 18.6 percent so far this month after a mere 0.2 percent decrease in March as a result of the lockdowns in the United States and Europe after the Covid-19 pandemic hit our major markets. Our trade with Southeast Asian countries and the Middle East also suffered serious losses.
The pandemic is shaking our mainstay industries. Kia Motors is considering a suspension of three plants, including one in Gyeonggi. Steelmaking and petrochemical companies have decided to cut production followed by the shipbuilding industry, all desperately in need of overseas demand. Such a dire situation affects employment, as seen in 898.2 billion won ($737.7 million) in jobless benefits claimed in March by those who lost jobs. That’s not all. New job offerings have decreased by over 45 percent compared to last year.
Korea faces an unprecedented crisis. The IMF’s Managing Director, Kristalina Georgieva, warned about the worst economic slump since the Great Depression. That’s why governments have joined hands with their central banks to announce — and immediately put into action — massive economic aid packages. They are struggling to help companies stay afloat by handing out cash to their workers, spending money to resuscitate demand, and even buying corporate bonds.
However, such efforts are hardly visible in Korea. Despite the Moon Jae-in administration’s vow to offer billions of dollars to the private sector in the last four emergency economic meetings, the promises are sounding increasingly empty. The government has not yet determined the scope of recipients of emergency relief after two weeks. A number of small merchants and mom-and-pop store owners have to wait in long lines of applicants for help each day. Entrepreneurs are increasingly worried about the possibility of bankruptcies.
The government must focus on two things: defending the people from the virus and protecting the economy. Jung Eun-kyeong, head of the Korean Centers for Disease Control and Prevention (KCDC), earned public trust thanks to her ability to communicate. But the government lacks economic wisdom. It may have learned lessons from the Middle East respiratory syndrome (MERS) crisis, but not from our foreign exchange crisis and the global financial crisis that followed.
Psychology matters in the economy. If a government drags its feet, it cannot expect a rapid recovery. We hope it treats the economy with as much seriousness as the coronavirus.
JoongAng Ilbo, April 14, Page 30