Value context and insight. lkm@koreatimes.co.kr
Wuhan coronavirus feared to dampen Korea's growth momentum
People wearing masks walk amid fear of Wuhan coronavirus at Suseo Station, Seoul, Sunday. Yonhap
By Lee Kyung-min
By Lee Kyung-min
The ongoing spread of Wuhan coronavirus is emerging as a considerable downside risk to the Korean economy, undermining government efforts to find a growth momentum in the first half of the year, experts said Sunday.
The unforeseen risk could dampen private consumption and the retail and services sectors, part of which is measured by a travel accounts surplus that heavily relies on the spending of inbound travelers from China among other countries.
The fresh concern involving sectors that long remained a positive contributor to growth could further drag down an economy still reeling from weak exports and plummeting investment, the two major areas hit hard by the drawn-out U.S.-China trade feud.
“The infectious disease could have a major impact on Korea,” Yonsei University economist Sung Tae-yoon said.
“Lockdowns and quarantine orders can seriously affect cross-border activities, notably trade and overall human exchanges. The economic impact will be much greater than previously thought depending on how contagious the disease becomes.”
The economy could suffer lower-than-expected growth, indicated by precedents following similar outbreaks of coronaviruses such as Severe Acute Respiratory Syndrome (SARS) from 2002 to 2003 and Middle East Respiratory Syndrome (MERS) from 2014 to 2015.
“Countries amid globalization are increasingly affected by China economically, Korea being one of the most affected. Swine flu or other virus outbreaks in the past had particularly greater impact on Korea when originating from China,” Sung said.
A recent report from Korea Institute for International Economic Policy (KIEP) showed the SARS outbreak led to a 1 percentage-point drop in the county's gross domestic product (GDP) in the second quarter of 2003.
The figure was based on the premise that the outbreak was the sole driver of the steep fall in exports in May in 2003.
The same year, the number of travelers between Korea and China dropped for the first time in four years.
The number of outbound Korean travelers to China was 1.94 million in 2003, down 180,000 from 2.12 million in 2002. That of inbound Chinese travelers to Korea was 512,700 down from 539,400 in 2002.
In the aftermath of the 2015 MERS outbreak, the number of inbound foreign travelers plunged to about 750,000 in June, around half that from 1.33 million in May. This caused the country's economy to report only 0.4 percent quarter-on-quarter growth in the April-June period in 2015.
The U.S. Centers for Disease Control and Prevention report on the economic impact of the 2015 MERS outbreak on Korea's tourism-related industries showed Korea lost $2.6 billion (3.03 trillion won) in tourism revenue from non-citizen travelers, accounting for about 0.2 percent of the 2015 GDP.
The Korea Center for International Finance (KCIF) said in a recent report that the possible mutation of the virus remains a risk to be monitored, while the economy is expected to suffer less damage this time compared to the SARS outbreak.
According to the World Health Organization's (WHO) most recent report on the virus, it has infected almost two thousand people, with some 56 cases resulting in death thus far while other more recent media reports indicate the number of fatalities has already climbed to 80. The WHO has yet to declare this a global health emergency but said it would continue to monitor the virus.