Govt. comes up with 50 trillion financial support package for SMEs and self-employed businesses and other steps to stem fallout; $60 billion bilateral currency swap arragement between Korea and U.S.
President Moon Jae-in speaks at a meeting at Seoul City Hall on March 16 to discuss ways of containing the spread of COVID-19 as Minister Park Neung-hoo of Health and Welfare, Minister of Interior and Safety Chin Young, and Seoul Mayor Park Won-soon look on.
COVID-19, which started in China late last year, has now worsened into a global pandemic, sending countries around the globe into a state of emergency to contain the spread of the virus, which is already causing global economic calamity. Many countries and cities have ordered lockdowns and travel restrictions.
Coronavirus infection and accompanying fears rattled the global real economy, disrupting many industries and crashing stocks in major countries. Crude oil prices, as well as gold prices, plunged in unprecedented speed.
The United States, Japan and Europe, came up with massive steps to boost their respective economies to stem the fallout from the effects of the pandemic.
U.S. President Donald Trump put forward a $1 trillion pump-priming package, including $1,000 cash assistance to each American, to reduce economic panic caused by the pandemic.
Korea agreed to sign a currency swap deal worth $60 billion with the United States. (Photo: MOEF)
The U.S. Federal Reserve had already cut its benchmark interest rate to zero on March 16, launching a new round of quantitative easing. The Bank of Korea followed suit by slashing its benchmark interest rate to a record low of 0.75 percent on March 16.
Despite quantitative easing by various countries, the New York Stock Exchange opened lower on March 18. The Dow Jones Industrial Average and Nasdaq Composite each hovered below the 20,000 and 7,000 territory, respectively.
WTI crude stood at $24.22 per barrel, a 10.13 percent plunge. The price once logged an 11 percent drop to $23, the lowest in 17 years. At the same time, UK, German, French and other European stock markets dropped of 4 to 5 percent. Earlier, the Korean Composite Stock Price Index (Kospi), closed at 1,591.20 on March 18, an 81.24 point drop, or off 4.86 percent, the lowest level in nine years and 10 months. The index plunged to 1,582.12 on March 26, 2010.
At a roundtable meeting with business and labor representatives at Cheong Wa Dae, President Moon Jae-in said, “Chances are high that an economic crisis might be protracted, and not just a few sectors but all industries are in a crisis situation.”
President Moon Jae-in holds a roundtable meeting with business, labor, other economic circle representatives at Cheong Wa Dae on March 18 to discuss ways of overcoming difficulties, caused by the spread of COVID-19.
Chairman Sohn Kyung-shik of the Korea Employers Federation demanded front-loading of government budgets and public entities’ funds, as well as corporate tax cuts.
Chairman Kim Young-ju of the Korea International Trade Association asked for extraordinary fiscal, tax and financial support measures, saying steps should be taken to prevent the impact of the COVID-19 outbreak from leading to job losses and bankruptcies.
President Moon promised “unprecedented countermeasures,” citing simultaneous impacts on demand and supply, coupled with complicated real and financial crisis, different from past financial crises.
Economists in Korea and abroad warned of a V-shaped recession in the global and Korean economies, influenced by the coronavirus outbreak.
The Korean economy, which depends heavily on exports, is considered to be vulnerable to the shock of the pandemic, so Korean policymakers should brace for what will happen next, such as a potential credit crisis, they said.
A day after the National Assembly’s approval of an 11.7-trillion won supplementary budget, the ruling party and government on March 18 set in motion preparations an extra budget. On the same day, the government decided to channel some 50 billion won to help the transportation industry, hit hardest by COVID-19 outbreak.
The step was decided by a crisis management meeting headed by Deputy Prime Minister-Minister of Economy. President Moon convened the first emergency economic meeting at Cheong Wa Dae on March 19. The government announced a 50 trillion won financial support package designed to ease a liquidity crunch on SMEs and self-employed businesses.
Among the steps to stem the economic impact of the virus include the extension of a 12 trillion won emergency management fund with an annual interest rate of 1.5 percent, and a six-month reprieve of the existing loans and their interests, owed by SMEs and self-employed businesses.
The nation’s 5.48 million self-employed and small businesses, already burdened with heavy debt levels, are expected to be hit the hardest by the virus outbreak.
Korea agreed to sign a currency swap deal worth $60 billion with the U.S. in a move designed to ease a liquidity crunch, caused by the virus outbreak. The step is expected to stabilize the Korean currency, whose exchange rate once shot up above 1,300 won U.S. per dollar.
The first emergency economic meeting did not take up “basic disaster income” during the meeting. A ranking presidential official reportedly touched on the designing of the matter. Ruling party officials echoed views on basic disaster income, which had been floated by Seoul Mayor Park Won-soon and Gyeonggi-do Gov. Lee Jae-myung.
But the international credit rating agency Fitch issued a report on Feb. 12, concluding that raising debt levels of the Korean public sector could pose problems, possibly resulting in a lowering of its credit rating.
Figures released by the MOEF showed the nation’s debt-to-GDP ratio is predicted to surge from 37.2 percent to 41.2 percent, surpassing the 40 percent territory, considered as the Maginot Line. Worry has been mounting over the government‘s dramatic increase in welfare spending.
The nation’s COVID-19 cases were tallied at 8,652 as of March 20, up 87 from a day earlier, the Korea Center for Disease Control and Prevention said.
Despite signs of slowing in daily case increase, health authorities are still on an alert due to the probability that cluster infections might occur like the latest cases of community contagion at a call center in Seoul and nursing homes in the Daegu and Gyeongbuk area.
Health authorities said 7,478 virus patients or 86.4 percent out of the nation’s total cases come from the Daegu-Gyeongbuk area. A cluster contagion of the Daegu congregation of the secretive Shincheonji of Jesus has become the epicenter of Korea’s virus outbreak.
Daegu Mayor Kwon Young-jin and Gyeongsangbuk-do Gov. Lee Cheol-woo made a request to declare the Daegu-Gyeongsangbuk-do area as a special disaster zone to ease the difficulties residents experience.
On the recommendation of Prime Minister Chung Sye-kyun, President Moon declared Daegu and part of Geyongsangbuk-do as a special disaster zone on March 15, the first such declaration caused by a disease, not a physical natural disaster.
President Moon Jae-in convenes the first emergency economic meeting at Cheong Wa Dae on March 19 in which the government announced a 50 trillion won financial support package designed to ease a liquidity crunch on SMEs and self-employed businesses. (Photos on the courtesy of Cheong Wa Dae website)
Donations Pour in to Aid Victims in Daegu, Gyeongsasngbuk-do
An increasing number of companies, organizations, entertainment superstars and the general public have joined in a nationwide move to lend a helping hand to coronavirus victims and provide support to quarantine efforts in the Daegu and Gyeongsangbuk-do areas.
Samsung Group announced a 30 billion won support package on Feb 26.
The following day, POSCO Group followed suite by donating 5 billion won. The steelmaker has its headquarters and plant in the Geyongsangbuk-do area. Hyundai Motor Group contributed 5 billion won to Korea Disaster Relief Association.
GS, Hyundai Heavy Industries, Shinsegae, CJ, Doosan, and Hyundai Department groups each came up with a 1 billion won support package.
Donations contributed to the Community Chest of Korea as of March 9 amounted to 43.33 billion won as of March 9.
The total stood at 39.83 billion won and 3.5 billion won in kind. Among big contributors are SK Group and LG Group, which each donated 5 billion won,; Naver, 2 billion won,; GS Group, 1 billion won,; Shinhan Financial Group, 1 billion won,; Lotte Group 505 million won,; Samsung Life, 500 million won,; LS Group 300 million won,; AmorePacific, 300 million won,; and Doosan Group, 300 million won.
Companies are scrambling to implement diverse actions to protect their offices and plants from the spread of the novel coronavirus in preemptive steps to prevent contagion, which could lead to closures and adversely affecting their business performances.
Companies pay attention to ensure the safety of not only staffers, but also their cooperative companies, customers and local community.
For instance, Samsung Group doled out gifts to cheer up executives and staff members from subsidiary companies, cooperative companies and parents of Samsung officials who live in the Daegu-Gyeongsangbuk-do area. Hyundai Motor Group came to aid of its cooperative automotive parts makers with a 1 trillion won financial support package.