As the outbreak of China’s new coronavirus rapidly spreads, concerns have been raised about the Korean economy that heavily depends on China, the nation’s top export destination by volume.
On Wednesday, China confirmed the number of deaths from the coronavirus epidemic at 132 and the number of confirmed cases at around 6,000.
If the coronavirus turns into a prolonged outbreak, “the biggest concern is the impact on the Chinese economy,” said Park Sang-hyun, an analyst at Hi Investment & Securities. China’s in-country demand is likely to shrink sharply in the first quarter and this will also burden the Korean economy, he said.
According to a recent report on “The unknown pneumonia originating from China” published by the Korea Institute for International Economic Policy, the severe acute respiratory syndrome that started from China in 2003 is estimated to have reduced Korea’s gross domestic product rate by one percentage point in the second quarter of the year. The report said the H1N1 -- or swine flu -- pandemic of 2009 and Middle East respiratory syndrome outbreak of 2015 also negatively affected the Korean economy.
“China’s impact on the world economy is greater than in the past. So the negative effect may be greater,” said Sung Tae-yoon, a professor of economics at Yonsei University. China’s economy is eight times larger than in 2003 and its GDP accounts for 16.3 percent in the global economy.
By industry, “the country’s travel and leisure industry will likely be among the hardest hit,” said Lee Eun-taek, an analyst at KB Securities.
Hana Tour, the nation’s biggest tour agency, saw travel demand for China dip around 50 percent for February on-year on the combination of the virus and Hong Kong protests. No. 2 Mode Tour saw more than 4,000 cancellations for travel to China this month.
Uncertainties are also growing among Korean companies doing business in China.
In line with the Chinese government’s policy, Posco, Hyundai Motor and Kia Motors have delayed restarting local plants after the shutdown for the Lunar New Year holiday. SK Global Chemical, which has factories in Wuhan, urged employees to return home. LG Group and Hanwha Group banned employees from traveling to China. Low-cost airlines, such as Air Seoul, have suspended flights to China.
South Korea will use 20.8 billion won ($17.7 million) of its national budget for containment of the new Wuhan coronavirus.
On the possible economic impact of the outbreak, Finance Minister Hong Nam-ki said Tuesday the government is closely analyzing the effects it could have on “China’s consumption and productivity, the global economy and Korea’s exports.”
The Industry Ministry launched the task force to respond to the spread of the virus. The Small and Medium Enterprise Minister Park Young-sun ordered to closely monitor the damages of small businesses. Korea Trade-Investment Promotion Agency set up an emergency team at the headquarters to identify trends and situations in each country to inform buyers and investors.
By Shin Ji-hye (firstname.lastname@example.org)