Vice Minister of Economy: "V-Shaped Recovery Difficult, Even L-Shaped Path Feared" (Update)

Holding of the Macroeconomic Financial Meeting
"Concerns over Domestic and International Financial Market Instability Deepen... Reviewing Additional Response Measures"

[Asia Economy Reporter Jang Sehee] Kim Yong-beom, First Vice Minister of the Ministry of Economy and Finance, stated, "It will not be easy to see the so-called V-shaped recovery, a rebound following a temporary shock to the global economy as seen in past infectious disease cases," adding, "There are concerns about a U-shaped or even L-shaped recovery path."

On the day, Kim held a macroeconomic and financial meeting at the Seoul Banking Hall and said, "As the novel coronavirus infection (COVID-19) spreads into a global pandemic and continues for a considerable period, it cannot be ruled out that it will deliver a complex shock to both the real economy and the financial sector."

He diagnosed, "Due to restrictions on human and material movement, disruptions in the global value chain (GVC) and demand contraction are causing more significant shocks on both the supply and demand sides of the real economy," and explained, "Recently, the sharp drop in oil prices, expectations and disappointments regarding major countries' policy responses are acting in combination, amplifying volatility in international financial markets."

Regarding the U.S. central bank, the Federal Reserve (Fed), lowering the benchmark interest rate by 1 percentage point from 1.00%?1.25% to 0.00%?0.25% on the 15th (local time), he said, "The U.S. Fed decisively lowered the benchmark interest rate to 0?0.25%, the level used during the global financial crisis, until the situation calms down, and resumed quantitative easing at around $700 billion," adding, "It also lowered the currency swap line rates among six major central banks by 25 basis points to strengthen policy coordination, showing a proactive and bold response." This is the first time the U.S. has lowered the benchmark interest rate to near zero since December 2015.

Kim said, "The government is focusing on strengthening quarantine support with the belief that success in quarantine is the shortcut to gaining market trust." He also emphasized that ensuring public safety and risk management are of utmost importance.

He further stated, "Depending on future circumstances, we will consider step 4 and step 5 response plans if necessary," and added, "The government will maintain thorough risk management in the financial and foreign exchange sectors with a serious awareness of the crisis-level situation."

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