Vice Minister Ki Jae: "COVID-19 Restricts Economic Improvement Trend... Preparing for Worst-Case Scenario" (Update)

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] Kim Yongbeom, the 1st Vice Minister of the Ministry of Economy and Finance, diagnosed the situation related to the novel coronavirus infection (COVID-19) by stating, "Due to the decrease in inbound tourists and the contraction of domestic demand, consumption, and exports to China caused by COVID-19, there is a significant concern that the economic improvement trend observed since the end of last year may be constrained."

On the 24th, Vice Minister Kim held an expanded macroeconomic and financial meeting at the Bankers' Hall in Jung-gu, Seoul, and said, "The government will make every effort to minimize the damage to our economy and maintain the momentum of economic recovery by preparing for the worst-case scenario if the situation prolongs."

He also emphasized the remarks from the international credit rating agency Standard & Poor's (S&P) regarding South Korea's sovereign credit rating, explaining, "S&P evaluated that the impact of this situation on the Korean and Asia-Pacific economies is temporary, and the economy is expected to rebound next year, so the effect on the sovereign credit rating is limited."

Vice Minister Kim added, "Due to the expansion of concerns about global economic slowdown and the rapid increase in domestic confirmed cases, risk-averse tendencies have strengthened, causing continued volatility," and said, "Since mid-February, the recovery of global stock markets has slowed, while the safe-haven currency, the US dollar, has shown some strength." He further noted, "In the domestic financial market, stock prices are showing weakness, government bond yields are declining, and the won-dollar exchange rate is rising."

He also mentioned measures to minimize the economic impact of COVID-19. Vice Minister Kim stated, "We will mobilize all available government resources, including the prompt execution of 104.1 billion KRW from the central government's contingency fund and about 108.2 billion KRW from local governments' contingency funds and disaster management funds."

Furthermore, he said, "We will actively implement tax and financial support measures for affected industries, sector-specific support plans for small business owners, aviation and shipping, tourism, and regional economies, as well as expanding the closure of government and local government cafeterias." He added, "If abnormal market volatility expands, we will respond swiftly and decisively according to the prepared contingency plan."

Vice Minister Kim emphasized, "Economists describe the impact of COVID-19 on the global economy as a 'viral slowdown,' diagnosing it as causing risks that are difficult to quantify," and stressed, "If the government, local governments, quarantine authorities, and local residents unite and cooperate closely, we can definitely overcome this."

Meanwhile, officials from the Ministry of Trade, Industry and Energy, Financial Services Commission, Bank of Korea, Financial Supervisory Service, and the International Financial Center attended the meeting.