Back To Top

New coronavirus to strain Korean economy: finance minister

Seoul ups guard against downside risks amid rapid epidemic spread

Deputy Prime Minister and Finance Minister Hong Nam-ki on Monday speaks in a ministerial meeting to respond to the spread of the novel coronavirus. (Yonhap)
Deputy Prime Minister and Finance Minister Hong Nam-ki on Monday speaks in a ministerial meeting to respond to the spread of the novel coronavirus. (Yonhap)

The accelerating spread of the novel coronavirus, unless terminated swiftly, is likely to weigh down on South Korea’s economy, the nation’s chief fiscal policymaker said Monday.

With this latest stance, Seoul’s government tightened its guard from its earlier suggestion that the economic impact of the epidemic would remain limited.

“Unless terminated in its early stage, the novel coronavirus will act as downside pressure on the economy” Deputy Prime Minister and Finance Minister Hong Nam-ki said in an emergency ministerial meeting held at Seoul Government Complex.

“Possibilities are high that this situation will slow China’s economy, which will then have a negative impact on the global economy.”

The emergency policy meeting came in response to the rapid spread of the new coronavirus, after Korea confirmed its 15th case over the weekend. While no further spread of the virus was reported here, the virus has killed some 350 people in China’s Hubei province, where Wuhan is the capital.

“The current circumstances (concerning the spread of the virus) have so far had limited impact on our economy, but it has now become difficult to forejudge the future developments,” Hong said.

The priority task, especially for economy-related ministries, is to minimize the consequent blow on the economy and to safeguard the recovery momentum, he added.

The finance minister also reiterated a warning against price-rigging on face masks, vowing to effectuate a related legislative announcement later this week.

Starting Tuesday, Korea will temporarily ban the entry of foreigners who have visited Hubei province within the past 14 days.

To fully back the series of countermeasures, the fiscal chief has ordered all related ministries to execute the 20.8 billion won ($17.4 million) allocated for the quarantine budget and pledged to draw out of reserve funds if necessary. The country currently holds 2 trillion won in reserve funds.

Such a gesture of self-awareness and warning marked a change from the government’s relatively optimistic tone earlier.

“The impact (of the virus) on our economy is still limited,” said Vice Minister Kim Yong-beom in an economic vice-ministerial meeting on Friday.

“But considering the negative impact depending on future developments, (the government) will hold regular macroeconomy-finance meetings to review the potential impact on the real economy and the financial market.”

One of the reasons behind the tightened grip was a policy move to respond preemptively to potential downside risks amid recent signs of an economic recovery.

Key indexes such as industrial output, retail sales and equipment investments have remained in an uptrend for two months since end-December, according to data compiled by the Ministry of Trade, Industry and Energy last week.

The country’s export volume for January slipped 6.1 percent on-year, but considering the Lunar New Year holiday, the actual daily average climbed 4.8 percent on-year, data showed.

“The positive turn of key indexes, along with the anticipated recovery of DRAM chips within the first quarter -- we expect to see meaningful economic recovery in February-March,” Hong said.

“This is why we take the (issue of the novel coronavirus) all the more seriously.”

Severe acute respiratory syndrome in 2003 and Middle East respiratory syndrome in 2015 were seen to have lowered Korea’s gross domestic product growth pace by 0.1 percentage point and 0.3 percentage point, respectively.

By Bae Hyun-jung (