COVID-19 Spread in the US and Europe... Hits South Korean Economy in 3 Months

[Asia Economy Reporter Park So-yeon] There is a forecast that the Korean economy, which is highly dependent on exports, could be significantly affected by the spread of the novel coronavirus disease (COVID-19) in the United States and Europe.

Samil Accounting Corporation presented this outlook in its report titled 'Assessment of the Economic and Industrial Impact of COVID-19,' published on the 27th.

According to the report, the shares of the United States, Europe, and China in the global Gross Domestic Product (GDP) are 23.6%, 24.7%, and 15.3%, respectively, with the combined share of these three regions reaching around 60%.

These regions have a significant influence on the global economy, and especially the economic downturn in the consumption-driven United States and Europe inevitably impacts global demand.

Korea's total export ratio to GDP was 37.5% as of 2017, indicating a high sensitivity to the global economic situation.

Considering that it takes an average of 1.5 months from export contract to customs clearance, if the current situation continues, Korea's export indicators may show a downward trend after March.

Samil Accounting Corporation expects that the Korean government, which has better fiscal capacity than European countries such as Italy with strained national finances, will support the domestic economy's downward rigidity by coordinating fiscal policies with countries around the world.

Meanwhile, the impact of COVID-19 varies across industries.

Industries such as travel, transportation, and offline retail are experiencing the greatest difficulties due to restrictions on trade and human movement.

The IT industry, which had some supply chain disruptions, has also seen demand-side impacts as the COVID-19 situation prolongs.

On the other hand, industries related to non-face-to-face services, online platforms, and health, such as pharmaceuticals, telecommunications, and online retail, are relatively positively affected.

Samil Accounting Corporation stated, "It seems difficult for the global economy to rebound easily until a COVID-19 treatment is developed, but once the COVID-19 situation enters a stabilization phase, recovery is expected to proceed rapidly thereafter."