"No Time to Separate Okseok, Emergency Fund Injection First"

Economic Researchers' Urgent Policy Recommendations

Concerns Over Chain Bankruptcies Due to Funding Crunch Extend Beyond Marginal Companies to Normal Businesses

Government Financial Support Should Prioritize Direct Funding to Companies Before Other Measures

Sequential Monetary Stimulus Should Shift from Consumption Incentives to Investment Incentives

[Asia Economy Reporter Park Soyeon] The economic crisis triggered by the novel coronavirus disease (COVID-19) has evolved into a complex crisis impacting domestic demand, manufacturing, and now finance, causing fear among Korean companies to reach its peak. Experts warn that the COVID-19-induced economic crisis is likely to develop into a situation more severe than the 2008 global financial crisis, advising that the government prioritize direct financial support to companies.

On the 13th, Hong Seong-il, head of the Economic Policy Team at the Korea Economic Research Institute, stated, "The most urgent need for companies right now is direct financial support," adding, "At this moment, it is difficult to distinguish between temporarily distressed normal companies and zombie companies that cannot recover, so support should be provided without discrimination."

In particular, Hong emphasized, "If companies experiencing temporary funding shortages rather than marginal companies go bankrupt in chains, the social cost of rebuilding will be even greater," and added, "The government's top priority policy should be to ensure smooth cash flow for companies that have fixed operating costs but no sales and thus cannot meet their funding schedules."

Jung Eun-mi, head of the Growth Engine Industry Research Division at the Korea Institute for Industrial Economics and Trade, also explained, "This is an emergency situation leading to production stoppages, delivery halts, and suspension of payment for goods," and noted, "The biggest concern is the blockage of corporate cash flow, including interest costs on facility investments."

She advised, "Management funding support should be prioritized for sectors directly affected by COVID-19, such as tourism, lodging, and food services, followed by support for seasonal consumer goods sectors where inventory deteriorates over time."

There was also advice to actively use cards or other measures to stimulate domestic consumption amid simultaneous export and domestic demand slumps. Cho Cheol, senior research fellow at the Korea Institute for Industrial Economics and Trade, said, "Ultimately, the biggest problem is the contraction of consumer sentiment, so measures such as expanding individual consumption tax cuts on automobiles, subsidies for early scrapping of old vehicles, and refunds on home appliance purchases could be considered."

Experts also diagnosed that routine business operations of companies are currently paralyzed and emphasized the need for administrative procedures to adapt accordingly. Since tasks such as business reporting, safety inspections, and various payments are not being conducted normally, extensions of administrative deadlines are necessary.

Proposals for emergency measures include extending corporate tax payment deadlines for all companies and temporarily introducing shadow voting (a system that counts votes as cast even if shareholders do not attend the general meeting, applying their voting ratios to resolutions) to prevent crises caused by insufficient quorum at shareholder meetings.

Jo Kyung-yeop, director of economic research at the Korea Economic Research Institute, said, "Our companies’ fundamental strength has weakened due to policies that constrain them, such as minimum wage increases, corporate tax hikes, and work hour restrictions, and now they are suffering from the severe illness of COVID-19," adding, "While quarantine is the top priority, the government needs to actively respond by temporarily suspending policies that burden our companies."

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