By Lee Min-hyung
The government should come up with detailed countermeasures to minimize a possible post-pandemic unemployment crisis here, as lost jobs rarely come back when they end up increasing the debt load for small- and medium-sized enterprises (SMEs), a Hong Kong-based economic expert said Tuesday.
"Large scale layoffs have started happening and will likely continue," David S. Lee, a senior lecturer of business at the University of Hong Kong, said in an interview. He started his business career at Goldman Sachs and had a years-long career in the investment banking industry before joining the university.
"What we have seen in recent crises is that some of those jobs do not always come back just because the economic numbers have recovered," he said.
The opinion comes at a time when the global economy is showing signs of entering a recession as the global spread of the coronavirus is on track to freeze economic activities worldwide.
Korea is one of the Asian countries hit hardest by the virus-driven economic shock, with a number of economic indices ― such as GDP growth outlook and corporate and consumer sentiment ― on a downward spiral.
The expert urged the government to step up efforts to introduce more aggressive financial programs to help offset risks that small businesses suffer.
"For example, the United States just passed the Coronavirus Aid, Relief and Economic Security Act (Cares Act), which allows for small businesses to qualify for loans on favorable terms to allow such businesses to pay salary as well as cover costs to stay afloat during this time," he said.
Against a similar backdrop, financial authorities here also need to augment such programs by providing guarantees for new bank loans and other forms of financing to small businesses, he noted.
"The government also needs to encourage financial institutions to extend or waive current loans and financing conditions to alleviate pressure on small businesses," he said.
Lee said the key lies in how much economic activity here will continue over the next few weeks.
"Other places in the world have basically gone to full lockdown with most restaurants, stores and establishments closed," he said. "If, however, Korea has to introduce more extreme measures like a full shutdown, then the situation will become even more dynamic given the difficulties many Korean SMEs and sole proprietorships were facing even prior to the current public health crisis."
Despite the uncertainty surrounding the duration and impact of the virus, the government is advised to be fully prepared to stop the COVID-19 malaise from worsening economic conditions here, he noted.
"The time variable is critical here. On the one hand, speed is of the essence because this financial support for vulnerable industries is already critical now, and will only expand as more industries and people are affected as the economy slows," he said. "The government must be prepared to pursue this path of support for an ill-defined period, which may prove difficult."
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| David S. Lee, senior lecturer at University of Hong Kong |
"Large scale layoffs have started happening and will likely continue," David S. Lee, a senior lecturer of business at the University of Hong Kong, said in an interview. He started his business career at Goldman Sachs and had a years-long career in the investment banking industry before joining the university.
"What we have seen in recent crises is that some of those jobs do not always come back just because the economic numbers have recovered," he said.
The opinion comes at a time when the global economy is showing signs of entering a recession as the global spread of the coronavirus is on track to freeze economic activities worldwide.
Korea is one of the Asian countries hit hardest by the virus-driven economic shock, with a number of economic indices ― such as GDP growth outlook and corporate and consumer sentiment ― on a downward spiral.
The expert urged the government to step up efforts to introduce more aggressive financial programs to help offset risks that small businesses suffer.
"For example, the United States just passed the Coronavirus Aid, Relief and Economic Security Act (Cares Act), which allows for small businesses to qualify for loans on favorable terms to allow such businesses to pay salary as well as cover costs to stay afloat during this time," he said.
Against a similar backdrop, financial authorities here also need to augment such programs by providing guarantees for new bank loans and other forms of financing to small businesses, he noted.
"The government also needs to encourage financial institutions to extend or waive current loans and financing conditions to alleviate pressure on small businesses," he said.
Lee said the key lies in how much economic activity here will continue over the next few weeks.
"Other places in the world have basically gone to full lockdown with most restaurants, stores and establishments closed," he said. "If, however, Korea has to introduce more extreme measures like a full shutdown, then the situation will become even more dynamic given the difficulties many Korean SMEs and sole proprietorships were facing even prior to the current public health crisis."
Despite the uncertainty surrounding the duration and impact of the virus, the government is advised to be fully prepared to stop the COVID-19 malaise from worsening economic conditions here, he noted.
"The time variable is critical here. On the one hand, speed is of the essence because this financial support for vulnerable industries is already critical now, and will only expand as more industries and people are affected as the economy slows," he said. "The government must be prepared to pursue this path of support for an ill-defined period, which may prove difficult."
