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(EDITORIAL from Korea Times on Feb. 4)

All News 07:01 February 04, 2020

Economic fallout from virus
Korea Inc. faces growing downside risk

The rapid spread of the new coronavirus is not just posing a great threat to public health; it is also destabilizing financial markets and increasing economic uncertainly across the world, not to mention China. No one can rule out the possibility of a global economic crisis if the epidemic persists for a long period.

The mounting fears of the virus have sent the Chinese stock market into a tailspin. On Monday, the benchmark Shanghai Composite Index lost 7.7 percent, nose-diving to a one-year low. This market crash is a reminder of how serious the public health emergency is. It is raising worries that the outbreak may result in economic woes reminiscent of the 1997-98 Asian currency turbulence and the 2008 global financial crisis.

The global airline and tourism industry has already begun to take the brunt of the virus that originated in Wuhan, the capital of China's central Hubei Province. More worrisome is that the Chinese manufacturing sector is also undergoing production delays, which could undermine the global supply chain. Distribution and consumer goods production firms are feeling the pain of the outbreak.

No country will suffer more damage than South Korea because of its heavy reliance on the Chinese economy. China is the country's largest trading partner ― 25 percent of Korea's exports go to China. That's why Finance-Economy Minister Hong Nam-ki has promised to spare no efforts to minimize the economic fallout from the outbreak. He said the coronavirus is expected to weigh on the economy unless the epidemic is contained swiftly.

The outbreak has hit the domestic auto industry. Ssangyong Motor has decided to stop its assembly lines in its factory in Pyeongtaek, Gyeonggi Province, for nine days from Tuesday due to a shortage of parts supplied by Chinese firms. Hyundai Motor plans to reduced its operations for similar reasons. Manufactures of television, refrigerators, smartphones and computers could suffer similar problems if Chinese parts suppliers stop production in the face of the novel virus.

The Moon Jae-in administration may find it difficult to achieve its economic growth target of 2.4 percent this year. The economy showed a sign of recovery from December, but the raging epidemic is pouring cold water over a potential rebound in both exports and domestic consumption. This explains why the government should take pro-active measures to minimize the potential damage arising from the Wuhan coronavirus.

We urge the government to mobilize all means to protect people from the virus as well as prevent the economy from plunging into an abyss. Possible measures could include an interest rate cut and a large-scale extra budget to boost consumption and encourage corporate investment. It is important to take pre-emptive action to better cope with the emergency situation. Market- and business-friendly policies are also key to avoiding the worst-case scenario.

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