Hankyung Research Institute: "Growth Slowdown in Major Countries Negatively Impacts Korea's Growth Rate... International Cooperation Needed"

"Major Countries' Growth Slowdown Could Reduce South Korea's Growth Rate by 1.5% to 2 Percentage Points"

[Asia Economy Reporter Ki-min Lee] There is a claim that the growth slowdown in major countries due to the spread of the novel coronavirus infection (COVID-19) could also lower South Korea's growth rate, necessitating close international cooperation.

On the 8th, the Korea Economic Research Institute (KERI) stated in its analysis titled "Impact Analysis of Major Countries' Growth Slowdown on Our Growth" that "the growth slowdown in major countries could reduce our growth rate by 1.5 to 2 percentage points," and emphasized that "along with economic stimulus, close international cooperation is needed to prevent the spread of COVID-19 and the contraction of international trade."

KERI explained that based on OECD data analysis measuring the impact of the growth rates of the three countries?the United States, China, and Japan?on South Korea's growth rate, it was found that South Korea's growth rate is highly correlated with the growth rates of these three countries. If the growth rates of the U.S. and China fall by 1 percentage point, South Korea's growth rate decreases by 0.4 percentage points, and if Japan's growth rate falls by 1 percentage point, South Korea's growth rate also declines by 0.5 percentage points.

Based on recent growth forecasts announced by the international credit rating agency Fitch, KERI projected that the U.S., China, and Japan would reduce South Korea's growth rate by 2 percentage points, 1.9 percentage points, and 1.5 percentage points respectively. Earlier, on the 2nd, Fitch lowered the global growth rate forecast by 4.4 percentage points from 2.5% to -1.9%. In particular, the U.S. forecast was sharply lowered from 2.0% to -3.3%, China from 5.9% to 1.6%, and Japan from 0.4% to -2.7%. South Korea's growth forecast was revised downward by 1.4 percentage points from 2.2% to 0.8%.

KERI argued that considering the characteristics of South Korea's economy, which is highly dependent on external factors, and the deepened level of globalization, it is difficult for the economy to recover solely through independent economic stimulus and quarantine measures. Therefore, it is necessary to strengthen economic stimulus policies worldwide and prevent the contraction of international trade through international cooperation.

Specifically, KERI proposed that as a G20 member country, South Korea should actively participate in discussions on economic stimulus and cooperate to enable major countries to swiftly implement expanded fiscal spending and quantitative easing. It also pointed out that expanding currency swaps between key reserve currency countries and major non-reserve currency countries to reduce instability in international financial and foreign exchange markets, as well as sharing quarantine-related know-how internationally, should be pursued together.

Furthermore, KERI emphasized the need to prevent the spread of protectionism in the form of self-help measures that may arise during global economic recessions and instability. To this end, it called for leading an international agreement to allow business entry of entrepreneurs who have certified their health status, and to promote the easing of cross-border procedures for goods to ensure that human border closures do not become a graveyard for international trade.

Choo Kwang-ho, Director of Economic Policy at KERI, said, "Domestically, large-scale fiscal spending expansion and quantitative easing policies have begun to minimize the economic adverse effects of COVID-19," adding, "Now is the time for efforts to promote international cooperation in economic stimulus and quarantine, exceptional allowance of business entry, and simplification of trade procedures to facilitate international trade."

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