Virus will stymie Seoul's economic recovery hopes

Subject

The economic outlook for South Korea in 2020.

Significance

Hong Nam-ki, South Korea’s finance minister and deputy premier for economic affairs, admitted on February 3 that the coronavirus outbreak in China could cut South Korea’s GDP growth by up to 0.7 percentage points this year. Hyundai and other carmakers are already suspending production, owing to shortages of key components sourced from China.

Impacts

• The risk to South Korea is less from illness than economic disruption, principally disrupted supply chains and reduced consumption.
• Tourism is especially vulnerable to damage by individual and collective responses to the coronavirus.
• GDP growth this year will fall below 2019’s 2%, already the slowest figure since 2009.
• Demographic pressures are growing, as highlighted by November’s lowest-ever monthly total of births.
• Moon’s bid to curb real estate prices may inhibit the nominally independent central bank from cutting interest rates to boost demand.