The coronavirus outbreak has left South Korea facing an economic “emergency”, report Song Jung-a and Stefania Palma for the Financial Times. President Moon Jae-in says that “all possible measures” will be needed to support the trade-dependent economy, which was already ailing because of the US-China trade war.
Exports account for 44% of South Korean GDP and the country is considered a bellwether for global trade. Last year GDP grew by just 2%, the slowest rate in a decade. The Kospi stock index gained 7.7% in 2019, underwhelming compared with many other markets. Its index plunged almost 4% on Monday. The South Korean won has fallen to a six-month low against the dollar. South Korea has the largest number of cases of the coronavirus outside China. The outbreak, centred on the city of Daegu, has prompted authorities to raise the national virus alert to its highest level, says Choe Sang-Hun for The New York Times. That empowers the government to close schools and ban outdoor rallies. For the time being, however, Seoul is resisting calls for a Wuhan-style lockdown in Daegu.
GDP will now expand by just 1.8% this year, says Chong Hoon Park of Standard Chartered, with first quarter GDP set to shrink by 1%. But with monetary and fiscal stimulus in the pipeline growth should rebound in the second quarter. The Bank of Korea is likely to cut interest rates.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Trouble in Korea is part of the “increasingly visible” economic fallout of the coronavirus beyond China’s borders, says Keith Johnson in Foreign Policy. Singapore has slashed its growth outlook for 2020 and announced a $4.6bn stimulus package. Thailand and Malaysia have also cut growth forecasts. It seems the outbreak will “kneecap the incipient recovery in global manufacturing”.
-
Water companies blocked from using customer money to pay “undeserved” bonusesThe regulator has blocked three water companies from using billpayer money to pay £1.5 million in exec bonuses
-
Will the Bitcoin price hit $100,000?With Bitcoin prices trading just below $100,000, we explore whether the cryptocurrency can hit the milestone.
-
UK wages grow at a record paceThe latest UK wages data will add pressure on the BoE to push interest rates even higher.
-
Trapped in a time of zombie governmentIt’s not just companies that are eking out an existence, says Max King. The state is in the twilight zone too.
-
America is in deep denial over debtThe downgrade in America’s credit rating was much criticised by the US government, says Alex Rankine. But was it a long time coming?
-
UK economy avoids stagnation with surprise growthGross domestic product increased by 0.2% in the second quarter and by 0.5% in June
-
Bank of England raises interest rates to 5.25%The Bank has hiked rates from 5% to 5.25%, marking the 14th increase in a row. We explain what it means for savers and homeowners - and whether more rate rises are on the horizon
-
UK wage growth hits a record highStubborn inflation fuels wage growth, hitting a 20-year record high. But unemployment jumps
-
UK inflation remains at 8.7% ‒ what it means for your moneyInflation was unmoved at 8.7% in the 12 months to May. What does this ‘sticky’ rate of inflation mean for your money?
-
VICE bankruptcy: how did it happen?Was the VICE bankruptcy inevitable? We look into how the once multibillion-dollar came crashing down.
