Fears of coronavirus-triggered downturn loom large

Stocks are tumbling amid fears of coronavirus-triggered economic crisis. South Korean shares started to fall immediately after market opening on Friday, prompting the country’s first ever double circuit breakers in the Kospi and Kosdaq markets. In the U.S., the Dow plunged for its worst day on Thursday since Black Monday in 1987, shedding value of 18% in a week. Experts say the global economy is falling into a complex crisis worse than the 2008 global financial crisis, where both the real economy and the financial market suffer heavy losses.

The real economy is suffering with the coronavirus outbreak taking a toll on consumption, export, and production. The aviation, shipping, and distribution industries are operating below 20% with countries around the world closing their doors for fear of the coronavirus outbreak. The coronavirus outbreak has left industries in severe financial straits, worse than the 1997 Asian Financial Crisis. The situation is so serious that it could even lead to the collapse of industries. The number of Chinese tourists in South Korea fell 76% year-on-year last month. Automakers, department stores, and discount stores are seeing a drop in revenue, down by 20-30%.

President Moon Jae-in on Friday had a special meeting with the Bank of Korea governor as well as the country’s finance minister and officials. President Moon said the country is seeing an emergency that does not compare to the MERS or SARS outbreak and called for unprecedented measures. South Korea’s financial regulators have banned short selling for six months in order to reduce insecurity in the financial market and prevent stock market crash. The central bank, in consultation with the government, should come up with measures to stabilize the market, such as signing a currency swap agreement with the U.S. and cutting interest rates.

The government and the ruling party are divided over their policy response when the private and public sector should join forces to deal with the situation. Ruling Democratic Party of Korea Chairman Lee Hae-chan blasted Deputy Prime Minister and Finance Minister Hong Nam-ki for not acting enough at Wednesday’s meeting, severely criticized by saying that Hong should step down. Hong made a rebuttal on his Facebook page the next day, saying he would implement policies “on a manageable level.” Now is definitely not a time for a quarrel.

A bold and prompt response is required when fears of market turmoil are rising to the level of the 1929 Great Depression. But it is still unclear whether the ruling and opposition parties could pass the supplementary budget bill during the extraordinary parliamentary session that ends next Tuesday. Now is not the time for the government and political parties to argue over the budget details. They should immediately implement emergency measures so that those who are suffering could deal with the critical situation.