"COVID-19 Shock, Faster and Deeper Than Expected"…Government Launches Contingency Plan Response (Comprehensive)

Asia, Europe, and Global Stock Markets Plunge... International Oil Prices Also Fluctuate
Government Holds Emergency Meeting Emphasizing Establishment of Emergency Response System

On the 10th, dealers were busy working in the dealing room of KEB Hana Bank in Euljiro, Seoul. On this day, the KOSPI index opened lower at 1,942.85, down 11.92 points (0.61%) from the previous trading day. Photo by Moon Honam munonam@

[Sejong=Asia Economy reporters Kim Hyun-jung and Jang Se-hee] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, urgently held a meeting of related ministers (Green Room meeting) on the 10th and mentioned a 'contingency plan' in response to the novel coronavirus infection (COVID-19) crisis because the global economy is heading toward a crisis phase faster and more sharply than initially expected. The stock markets in Asia, Europe, and the United States have fallen far beyond expectations, and international oil prices, which could impact the entire industry, have recorded a 'plunge' of more than 20%, raising concerns within the government that a shock comparable to the 2008 global financial crisis may occur.

At the meeting, Deputy Prime Minister Hong stated, "We will closely monitor market trends and respond according to the already prepared contingency plan if necessary," announcing policies such as strengthening short-selling restrictions and operating a response team for international oil prices. The meeting was scheduled urgently the previous evening as COVID-19 spread worldwide, increasing volatility in the economic and financial markets. Attendees, including the Minister of Trade, Industry and Energy, the Director of the Office for Government Policy Coordination, the Chairman of the Financial Services Commission, and the Blue House economic chief, described the recent domestic and international market atmosphere as 'emergency' and 'grave.'

Immediately after the related ministers' meeting, Kim Yong-beom, the 1st Vice Minister of the Ministry of Economy and Finance, also held a separate macroeconomic and financial meeting at the Seoul Bankers Hall, describing the recent situation as a 'critical juncture' and expressing concerns about downward pressure on global economic supply and demand. Vice Minister Kim said, "Concerns are spreading that the negative effects of COVID-19 on the global real economy will be deeper and longer-lasting than initially expected," adding, "Depending on how the situation unfolds, volatility in the global financial markets is expected to persist for a considerable period."

[Image source=Yonhap News]

However, Vice Minister Kim emphasized that the recent market trends are shocks caused by the external adverse factor of COVID-19 and drew a line against excessive fear. He said, "This shock does not mean that vulnerabilities and imbalances inherent in the financial system have begun to worsen, which is a significant difference from past global liquidity crises," adding, "Although some market indices have experienced somewhat excessive fluctuations, there is no need to harbor anxiety that it will escalate into a systemic crisis."

Experts foresee that if the COVID-19 pandemic prolongs and global economic uncertainty expands, unavoidable damage that is difficult to recover from will occur, emphasizing the need for the government's prompt response. Professor Jung Se-eun of the Department of Economics at Chungnam National University pointed out, "If COVID-19 is not contained within a month or two and continues for the next three to four months, the domestic economy could suffer significant damage," adding, "If financial market instability intensifies, structural crises such as capital flight will occur."

Joo Won, head of economic research at Hyundai Research Institute, expressed concern, saying, "The worst-case scenario, where the situation develops into a global economic crisis, cannot be ruled out," adding, "In that case, the global trade system could collapse, and with China's economic crisis and the pandemic becoming realities, the Korean economy's recession could be prolonged." Joo emphasized, "Along with micro-level policies to prepare for domestic market shocks, close attention must be paid to global capital flows and changes in international trade markets." An economic expert who requested anonymity said, "The economic team should no longer be preoccupied with mask distribution issues," pointing out, "Since concerns about crisis and contraction have been confirmed as realities in global stock markets, preparations for the worst-case scenario are necessary."

This content was produced with the assistance of AI translation services.