The Korea Institute for International Economic Policy (KIEP) said in its report on Feb. 18 that Covid-19’s adverse impact on South Korea will be second only to that on the United States unless the spread of the virus is contained in the near future, this is because South Korea and China are very closely interrelated in terms of intermediate goods supply, and Covid-19’s impact on the global economy is larger than SARS’.
In 2017, intermediate goods supplied from China to the United States accounted for 10.7 percent of China’s total intermediate goods supply and the United States was followed by South Korea (6.5 percent), Japan (5.5 percent), Germany (3.3 percent), Taiwan (2.7 percent), Vietnam (2.6 percent) and India (2.1 percent). In addition, South Korea accounted for 10.9 percent of China’s intermediate primary metal goods exports as the largest importer, 8.5 percent of its intermediate electronic component exports as the second-largest, and 7.5 percent of its intermediate chemical goods exports as the second-largest.
The institute pointed out that the coronavirus can adversely affect the South Korean economy via third countries as well. “The third countries in this case refer to ASEAN member countries in particular,” it explained, adding, “Their current growth strategies focus on exports and their dependence on the Chinese economy is continuing to rise and, as such, a slowdown of the Chinese economy will directly affect the trade and investment between China and the ASEAN, which is the second-largest export destination and third-largest investment destination for South Korea.”
According to the report, the number of confirmed infections reached 1,000 in four months during the spread of SARS in 2003 but the ongoing spread of Covid-19 has led to 711,318 confirmed infections and 1,775 deaths in 28 countries in just a couple of months.
“Concerns over unprecedented viruses such as Covid-19 may lead to a fundamental change in the international division of labor and separation between the U.S. and Chinese economies,” the KIEP said, adding, “In addition, a change in value chain structure may follow in Southeast Asia as well and the South Korean government needs to look into such possibilities.”