Value context and insight. lkm@koreatimes.co.kr
New wave of virus to hamper recovery
People seeking unemployment benefits queue to find a seat for a briefing session in Seoul, Aug. 10. Yonhap
By Lee Kyung-min
By Lee Kyung-min
The prospect of an economic rebound in the third quarter has become increasingly elusive, Tuesday, due to a recent flare-up of newly confirmed COVID-19 cases in and around Seoul over the past few days.
Experts say the government's ill-conceived consumption-boosting policies overlooked uncertainties concerning a possible unexpected spike in new cases, undermining the efficacy of the stimulus package altogether amid a growing need to draft a fourth extra budget.
Health Minister Park Neung-hoo said Tuesday that the confirmed cases over the past four days have soared to 695, after the figure topped 100, Aug. 14. Many of the newly infected were churchgoers that attended a religious gathering over the weekend in Seongbuk District, northeastern Seoul.
The remark adds to one made by Korea Centers for Disease Control and Prevention (KCDC) Director Jung Eun-kyeong who said Monday that unless brought under immediate control, the number of confirmed cases will grow astronomically, collapsing the medical treatment system and entailing an economic crisis.
The grave situation has led to precautionary social distancing and work-from-home policies, adopted by many subsidiaries of large conglomerates.
SK Innovation and SK Telecom, the energy and telecommunication subsidiaries of SK Group, are in a full or partial work-from-home mode, a move followed by major IT firms including Kakao and KT.
The collective action set to spread wider is highly likely to dampen the mood for optimism ― eagerly and almost solely ― maintained by the Ministry of Economy and Finance backed by a projected growth of 0.1 percent in 2020.
Many local and international organizations view the Korean economy will suffer a contraction of between 0.8 percent and 2.3 percent in 2020.
The gloomier-than-expected outlook is likely to take a heavier toll on people classified as “non-essential” personnel, mostly low-income earners, according to the Bank of Korea.
In a report released Aug. 18, the central bank said that one in three people will not be able to continue their normal economic activities if a tight lockdown takes place.
“About 35 percent of the workforce hold non-essential positions in contactless businesses which places them under greater fear of a short-term layoff. The less essential their work is, the more likely their job stability will be threatened. If their employment is adversely affected by lockdowns, a substantial period will be needed for them to recover from the shock,” the report said.
Also renewed by the unexpected spike are calls for another extra budget, an issue that has been put on hold due mostly to the faster-than-expected deterioration of fiscal soundness following the three previous spending packages worth nearly 60 trillion won ($50.7 billion).
The main opposition United Future Party and minor opposition Justice Party seek to put the issue to the fore at a provisional National Assembly session that began Tuesday and runs through Aug. 31.
Seoul National University economist Kim So-young said the government plan should have factored in the further spread of the virus instead of temporary measures to bolster consumption.
“Dishing out coupons to encourage eating out, for example, could not have been more inappropriate,” he said. “Poor planning has undermined the efficacy of fiscal spending that should be about finding ways to best induce the desired outcome via efficient allocation of limited state resources. This is especially true given fiscal soundness concerns should not be overlooked as funds spent means a responsibility to repay.”