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”.