South Korea Braces for Global Recession
March 20, 2020
Writing for the Diplomat Magazine, KEI Senior Director Troy Stangarone highlights how Seoul is preparing a stronger fiscal stimulus to deal with the economic shocks caused by the coronavirus outbreak.
As one of the first countries to deal with the supply shock stemming from China's aggressive measures to contain the coronavirus, Korea's overall imports from China for the first two months of the year fell 11.9% – with some industries that are more dependent on intermediary parts seeing steeper declines. For example, the automotice industry saw imports fall by nearly 40% during the same period.
In the early stage of the crisis, South Korea unveiled a $13.7 billion stimulus package on March 4 that would provide funding to address healthcare costs, provide support to small and medium enterprises impacted by the crisis, and help make up for expected shortfalls in tax revenues. It had also previously announced on February 17 that it would make 300 billion won ($240 million) worth of low-cost loans available to airlines. In addition, President Moon has empowered an emergency economic council to address potential consequences.
Observing Seoul's responses and with an eye on other economies struggling with the crisis, Stangarone notes that "the containment of the virus should remain the priority, but ensuring that the economic damage is limited should be the second priority. An emergency economic council that can move quickly and provide substantial economic aid as the crisis changes may be just what the South Korean economy needs."
Find the full article here