Worst is yet to come: finance ministry

By Kim Bo-eun

First Vice Minister of Economy and Finance Kim Yong-beom speaks during a meeting on the economy and financial markets at the Korea Federation of Banks in central Seoul, Monday. / Yonhap

Tension appears to be easing over the COVID-19 situation as the government stated it would ease quarantine rules after regional infections showed signs of containment. However, the finance ministry warned Monday that the worst effects of the health crisis on the economy have yet to be seen.

“Most experts view the second quarter as hitting rock bottom, which means the shock including the slowing of the real economy and unemployment will now begin to unfold,” First Vice Minister of Economy and Finance Kim Yong-beom, said at a meeting on the economy and financial markets at the Korea Federation of Banks in central Seoul.

The senior official said oil price shocks, risks stemming from emerging markets and movements of businesses around the world in reshoring would weigh down on the economy.

Volatility in oil prices will likely continue until demand is restored and the problem of storage space is resolved, according to the experts.

Concerns are also growing over emerging markets, as they struggle to deal with COVID-19. According to the International Monetary Fund, about 100 emerging economies have called for emergency financing so far. Forecasts show developing countries may face a crisis similar to that of the Asian Financial Crisis in 1998 as they see a dive in foreign reserves and a sharp depreciation in their currency as a result of a capital exodus.

In addition, reshoring of production to businesses' home countries and possible hikes in tariffs as major economies seek to decrease dependency on foreign partners and secure production at home could lead to a resumption of trade wars, the official noted.

Kim said the government will devise a “Korean New Deal” to increase jobs as a means to fight any oncoming recession. The government will seek to create jobs in IT, contactless medical services and online education courses, he said.