South Korea’s economic emergency

South Korea, already ailing because of the US-China trade war, is facing an "economic emergency"

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.

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”. 

Recommended

Chase Coleman: star hedgie hits the panic button
People

Chase Coleman: star hedgie hits the panic button

Chase Coleman got off to a sizzling start in the hedge-fund industry and became one of the biggest winners of the tech bull market. His fall from grac…
28 May 2022
How the West can win Putin’s war on food
Global Economy

How the West can win Putin’s war on food

The West could easily make up the shortfall if it let the free market rip, says Matthew Lynn.
28 May 2022
Which companies will lose the most from the energy windfall tax?
Energy stocks

Which companies will lose the most from the energy windfall tax?

The government’s new energy windfall tax has muddied the waters for investors and companies alike. Rupert Hargreaves explains how it might affect some…
27 May 2022
The MoneyWeek Podcast with Russell Napier at the Library of Mistakes
Investment strategy

The MoneyWeek Podcast with Russell Napier at the Library of Mistakes

Merryn talks to Russell Napier about Edinburgh’s Library of Mistakes, the age of debt and financial repression, plus why he has never invested in Chin…
27 May 2022

Most Popular

Scottish Mortgage Investment Trust has fallen hard. But is now the time to buy?
Investment trusts

Scottish Mortgage Investment Trust has fallen hard. But is now the time to buy?

After a spectacular couple of decades, the Scottish Mortgage Investment Trust has fallen by almost 45% so far this year. Rupert Hargreaves asks if no…
26 May 2022
The world’s hottest housing markets are faltering – is the UK next?
House prices

The world’s hottest housing markets are faltering – is the UK next?

As interest rates rise, house prices in the world’s most overpriced markets are starting to fall. The UK’s turn will come, says John Stepek. But will …
23 May 2022
Is it time to pick up growth stock bargains yet?
Investment strategy

Is it time to pick up growth stock bargains yet?

If you’re thinking of picking up some bargains from the tech stock crash, beware – there are still plenty of “growth traps” out there. John Stepek exp…
26 May 2022