Hong Nam-ki "New Coronavirus Affects Real Economy... Checking Impact on Exports and Domestic Demand"

by Kim Minyoung

Published 03 Feb.2020 14:05(KST)

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, visited the Ministry of Economy and Finance press room at the Government Sejong Complex on the 3rd and made opening remarks regarding recent economic issues.

Potential Impact on Both Exports and Domestic Demand... Reviewed by Scenario

Contingency Funds to Be Used if Quarantine Budget Is Insufficient... No Consideration of Supplementary Budget

[Asia Economy Reporter Kim Min-young] On the 3rd, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated, "We believe that the progression of the novel coronavirus infection (Wuhan pneumonia) situation may also impact the real economy."

At a press briefing held at the Government Complex Sejong on the same day, Deputy Prime Minister Hong said, "The area where the economic impact of this situation is clearly reflected in the indicators is the reduction in inbound tourists."

He added, "Since China is closely linked to our economy and this issue could extend to the global economy, the government is reviewing the ripple effects on exports and domestic demand."

He evaluated recent economic sentiment indicators such as industrial activity trends and export-import trends, noting that a recovery trend is emerging. Deputy Prime Minister Hong explained, "As you know, the December industrial activity report showed an increase in three key elements?total industrial production, retail sales, and facility investment?for two consecutive months. Looking at the daily export volume in January, exports increased by about 4.8%. The fact that daily export volume has turned positive is an important factor."

The return to an increasing trend in average daily export volume is the first in one year and two months. Considering positive factors such as the recent rise in semiconductor DRAM prices and an increase in operating days, Deputy Prime Minister Hong predicted that exports this month will be positive. He also emphasized that the improvement in both the January Consumer Sentiment Index (CSI) and the Business Survey Index (BSI) signals economic recovery.

However, there are concerns that the novel coronavirus may affect this economic recovery trend. Deputy Prime Minister Hong stated, "Since the spread of the novel coronavirus may impact the real economy, the government will focus on minimizing the economic ripple effects caused by this situation. It is important for the government to respond with policies to maintain the early-year economic recovery trend, and we will respond with full effort."

He revealed that the government is approaching the novel coronavirus response with a two-track strategy. Deputy Prime Minister Hong said, "The Prime Minister is leading strong quarantine measures to block the infectious disease and achieve early containment. Regarding the response to the novel coronavirus, the Economic Relations Ministers' Meeting and the Economic Vitality Measures Meeting, held regularly on Wednesdays, will review the situation more than twice a week and prepare related measures."

In particular, plans will be made to support industries expected to be hit by the novel coronavirus. Deputy Prime Minister Hong stated, "We will monitor the overall situation and devise support measures for industries that may be affected. These will include measures for the tourism sector, export strategies, aviation, maritime logistics, financial market impacts, manufacturing production measures, relief for small and medium-sized enterprises and small business owners, and domestic demand revitalization measures such as agricultural and fishery product consumption."

Regarding the possibility of pushing for an additional supplementary budget due to this situation, he once again drew a clear line. He said, "This year, 20.8 billion KRW has been secured as quarantine budget across ministries, and all of it can be supported. If the situation progresses and this quarantine budget is expected to be insufficient, the government will ensure sufficient support using contingency funds it has secured."