Korea Nears 'With Corona' Phase... "Positive for Economic Recovery" VS "Still Too Early"

Government Extends Social Distancing but Expands Incentives for Vaccinated Individuals
De Facto First Step Toward 'With Corona'... Diverging Opinions on Economic Impact

Government and Bank of Korea Forecast Growth Rate in the 4% Range... Consumption Expected to Boost if Quarantine Measures Are Eased

Possibility of Relief for Self-Employed Struggling Due to Prolonged COVID-19

Concerns Raised That Premature Easing of Quarantine Measures Could Increase Risks

Need for Economic Structural Changes from a Long-Term Perspective Rather Than Easing Quarantine Measures Focused Solely on Growth Rate

[Asia Economy Reporter Kim Eun-byeol] As the government takes the first steps toward 'With COVID-19' by maintaining social distancing but easing some quarantine measures, experts have mixed opinions on the resulting economic effects. The government is reportedly planning to discuss the transition to With COVID-19 as early as the end of this month.

Given the significant damage to self-employed and small business owners caused by the COVID-19 crisis lasting over a year and a half, there is a primary analysis that if With COVID-19 measures lead people to increase outdoor activities, it will positively impact economic recovery. Especially since the public is feeling fatigue over COVID-19 quarantine rules, the diminishing effectiveness of uniform quarantine measures is also a reason why they welcome coexistence with COVID-19. However, there are also opinions that premature easing of quarantine measures could increase COVID-19 risks, which might lead to re-strengthening quarantine stages and providing support funds again, a response considered undesirable. Some argue that it is not too late to move to With COVID-19 only after confirming vaccination rates and herd immunity effects.

On the morning of August 20, a notice stating the resumption of business after 'Level 4 Social Distancing' is posted at a restaurant on Sinchon Street in Seodaemun-gu, Seoul. [Image source=Yonhap News]

"830 Trillion Won in Loans" Self-Employed Facing Mass Closures... Industry Appeals for 'Transition in Quarantine Measures'
Bank of Korea: "Transition to With COVID-19 Is a Positive Factor for Growth Rate"

On the 2nd, five small and medium enterprise and small business organizations, including the Korea Federation of SMEs and the Korea Federation of Micro Enterprise, held a press conference appealing for a transition to quarantine measures that guarantee normal economic activities as much as possible. According to the 'Small Business Owners' Perception Survey on the Era of Coexisting with COVID-19' conducted by the Korea Federation of SMEs, 76.8% of small business owners agreed with the restructuring of the quarantine system. 91.4% of respondents said their sales in July and August decreased compared to the previous year, and 63% responded that if the current quarantine system continues, they would consider temporary closure or business shutdown. According to a survey by the Korea Economic Research Institute under the Federation of Korean Industries, 4 out of 10 self-employed people are currently considering closing their businesses.

If self-employed people can no longer endure, the government's annual economic growth target of 4.2% this year could be shaken. Particularly, Korea has a higher proportion of self-employed compared to OECD countries. The proportion of self-employed among total employed is about 20%, significantly higher than Germany (9.6%), the United States (6%), and Japan (10%). Especially, self-employed people have been surviving on debt as the COVID-19 crisis prolonged, and if mass closures occur and debts cannot be repaid, financial institutions could be hit in a chain reaction, leading to an economic crisis. As of the end of March this year, the loan amount for 2.456 million self-employed people in Korea reached 831.8 trillion won.

On the 2nd, at the Korea Federation of Small and Medium Business in Yeouido, Seoul, Kim Ki-moon, president of the Korea Federation of Small and Medium Business, along with representatives of small business organizations and self-employed individuals, held a press conference demanding a reform of the quarantine system. Photo by Kang Jin-hyung aymsdream@

The Bank of Korea also evaluated that the With COVID-19 measure could act as a positive factor for the growth rate. Lee Hwan-seok, Deputy Governor of the Bank of Korea, stated at the 'August Economic Outlook Briefing' on the 26th of last month, "If the direction shifts to With COVID-19, economic activity restrictions will be less despite the spread of COVID-19, so it can act as a positive factor for the growth rate."

Kim Kyung-soo, Emeritus Professor of Economics at Sungkyunkwan University, said, "If measures that uniformly close businesses continue as they are now, self-employed people cannot endure it," adding, "If the government has confidence and premise that it can continuously procure COVID-19 vaccines, under that assumption, quarantine measures should be finely tuned." However, he emphasized that stable vaccine procurement is key. He said, "It is wishful thinking that strong and short quarantine measures can control the COVID-19 crisis," and added that a sophisticated method to coexist with COVID-19 should be considered.

Claims That It Is Too Early to Transition Quarantine System... "Support Needed for Economic Structural Transformation from a Long-Term Perspective Rather Than Obsession with Growth Rate Targets"

On the other hand, some view that it is premature to suddenly transition the COVID-19 quarantine system at this time. As of the 4th, the vaccination rate for at least one dose among the total population is 58.2%. The quarantine authorities plan to complete vaccination for 36 million people, 70% of the total population, by the end of October. Although vaccination rates are expected to reach 70% by October as planned, those opposing the transition argue that it is not too late to switch after confirming actual vaccination results and herd immunity effects around October to November.

There are also concerns that the quarantine authorities' remarks seemingly anticipating With COVID-19 measures before the vaccination rate even reaches 70% could only lower vigilance. Given the risks of COVID-19 variants and breakthrough infections, it is important not just to look at vaccination rate figures but to see a meaningful decline in confirmed cases.

Lee Yoon-seok, Senior Research Fellow at the Korea Institute of Finance, said, "While vaccine development and vaccination are important, we have repeatedly seen the behavior of so-called 'advanced countries' where the number of confirmed cases explodes again due to neglecting mask-wearing and social distancing," adding, "This results from a tendency to take the fight against COVID-19 too lightly, and countries that practice mask-wearing and distancing can at least minimize damage."

He said, "The recently gaining momentum 'With COVID-19' policy focuses on managing severe cases, but it seems to be a rather risky measure," adding, "It seems that the government’s past economic management method of setting economic growth targets and concentrating policy capabilities to achieve them is the background for discussing policy shifts like With COVID-19."

He continued, "I think growth rates of 3% or 4% in the COVID-19 era are numbers without much meaning," and suggested, "Rather, while focusing on quarantine in the long term, funds should be supported to find ways to coexist with COVID-19 (to change the economic structure)."

This could include government funding, either fully or partially, for long-term coexistence methods with COVID-19, such as converting restaurants into rooms or booths, changing manufacturing processes that are difficult to do remotely into quarantine-friendly ones, or modifying multi-use facilities to be quarantine-friendly. Lee also said that for industries that find it difficult to coexist with COVID-19, the government should consider supporting measures such as 'industry conversion.' He added, "Entertainment industries like clubs are not sustainable if COVID-19 continues for several years," and "It is more productive for the government to help with industry conversion rather than imposing gathering bans and providing support funds."

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