[COVID-19 Transformation] "Policy Priorities Are Corporate Support, Domestic Demand Expansion, and Employment Retention"

Survey of 112 Experts on 'Post-COVID-19 Urgent Diagnosis'
Biggest Risk Factor: Large-Scale Bankruptcy of Small Business Owners and Self-Employed
"Companies Are the Economic Engine... Once It Stops, Recovery Is Difficult"

[Sejong=Asia Economy Reporter Kim Hyunjung] Domestic experts identified the "mass bankruptcy of small business owners and self-employed individuals" as the greatest risk factor facing the Korean economy amid the novel coronavirus disease (COVID-19) crisis. However, at this point, they agreed that the most urgent measure the government should pursue is "supporting companies facing severe management difficulties." Only a minority chose disaster relief funds as the priority. Considering the ripple effects not only on the real economy but also on employment and financial markets, the consensus is that creating a virtuous economic cycle through corporate normalization is the top priority.

According to a survey titled "Post COVID-19 Emergency Diagnosis," conducted by Asia Economy Newspaper on the 28th targeting 112 experts, 36.1% (40 respondents) answered that the greatest risk factor facing the Korean economy is the "mass bankruptcy of small business owners and self-employed individuals." This response reflects concerns over those who have little capacity to endure as sales plummet due to prolonged restrictions on routine external activities such as dining out, tourism, and shopping amid the COVID-19 crisis, placing them on the brink. This aligns with the actual results of a survey conducted by the Korea Federation of Small and Medium Business from the 2nd to the 8th, which targeted 1,392 small business owners. In that survey, about half of the respondents (48.5%) said they would consider closing their businesses if the crisis lasts more than six months, and 23.9% said they might close even before six months pass.

Other risk factors mentioned by experts included a surge in unemployment and employment crises (30 respondents, 27.0%), management crises in key industries (22 respondents, 19.8%), domestic demand slump due to sharp contraction in consumer sentiment (13 respondents, 11.7%), and financial instability caused by a rapid increase in corporate and household loans (4 respondents, 3.6%).

The industries expected to suffer the most damage (multiple answers allowed, two choices) were "land, water, and air transportation" (85 respondents, 38.5%). This was followed by accommodation (43 respondents, 19.5%), restaurants and pubs (27 respondents, 12.2%), and automobile manufacturing (20 respondents, 9.1%). Conversely, sectors such as electronic components, computers, audiovisual and communication equipment manufacturing, professional services like accounting, advertising, and management consulting, chemical product manufacturing, and agriculture, fisheries, and forestry were expected to be relatively less impacted or to recover from the damage relatively quickly.

Regarding the most urgent measures the government should take to prepare for the economic shock caused by COVID-19, 40.2% (45 respondents) pointed to "supporting companies facing severe management difficulties." Improving deteriorated consumer sentiment and policies to expand domestic demand (23 respondents, 20.5%), and job-related measures such as unemployment benefits and employment retention subsidies (19 respondents, 16.9%) were also highlighted. Support for the livelihoods of self-employed and small business owners, who were identified as the "greatest risk factor" due to their high risk of bankruptcy, ranked fourth at 16.1% (18 respondents). Only 5 respondents (4.5%) chose disaster relief funds or income compensation measures, which are currently a hot topic.

Experts diagnosed that considering the impact and sustainability, the key to overcoming COVID-19 and recovering the economy ultimately lies in "saving companies."

Professor Hong Kiyong of the Department of Business Administration at Incheon National University said, "Disaster relief funds, boosting domestic demand, and livelihood support for the self-employed are certainly important, but fundamentally, we need to create a virtuous cycle that leads to economic recovery, employment retention, and productivity improvement." He emphasized, "Companies are the engine of the Korean economy, and to efficiently allocate government resources funded by taxes, the focus should be on not shutting down this economic engine." Professor Kim Soyoung of Seoul National University's Department of Economics explained, "If companies go bankrupt, it can lead to financial sector instability and potentially escalate into a financial crisis. Jobs lost from bankrupt companies do not easily return, which can continuously have a negative impact on the economy."

However, respondents also expressed negative views on unconditional support for large corporations. Half of the respondents (59 respondents, 52.7%) said that self-help efforts are appropriate, and 18 respondents (16.1%) said support based on job retention is suitable as a direct support method for large corporations. About one in four (28 respondents, 25.0%) answered that support unrelated to the affected industries is necessary, while only 2 respondents (1.8%) said that support for large corporations itself is inappropriate. A research director at a securities firm expressed the view that "support should come first, followed by restructuring."

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