The Korean economy is hit hard by global COVID-19 infections that gripped the world. Two of the world's top three credit rating agencies lowered their forecasts for Korea's economic growth in 2020 to the 1 percent range, and some institutions did not rule out the possibility of Korea’s growth staying in the 0 percent range.
Standard & Poor’s predicted that Korea's growth rate will drop by 0.5 percentage point from 2.1 percent to 1.6 percent in 2020. Moody's Investors Service cut Korea’s growth estimate from 2.1 percent to 1.9 percent, while ING Group revised down its forecast from 2.2 percent to 1.7 percent. Morgan Stanley predicted that Korea's growth may drop 0.8 to 1.7 percentage points due to the COVID-19 virus.
Domestic economic institutions also made similar forecasts. The Woori Financial Management Institute predicted that if the COVID-19 crisis comes to an end in the first quarter, the Korean economic growth rate will drop by 0.3 percentage point during this period. But the negative impact can double if the outbreak continues into the second quarter and spreads widely outside China. If the epidemic is prolonged, the growth rate will decrease by at least 0.6 percentage point.
Nomura Securities predicted that in the worst case, Korea's economic growth rate would be lowered to minus 2.9 percent in the first quarter and JP Morgan suggested minus 0.3 percent.
Analysts say that the COVID-9 outbreak has a direct impact on the Korean economy because its fundamental strengths have been greatly weakened. They note that fundamental measures should be taken to promote domestic sales and exports, but the government relies solely on fiscal policies.
“China's economic growth rate has been lowered from 6 percent to 4 percent, and in the worst case, it may hit 0 percent,” said Cho Kyung-yeop, director of economic research at the Korea Economic Research Institute. “The Korean economy is highly dependent on China and therefore may even record negative growth.
"Korea has been hit directly by foreign variables such as the COVID-19 outbreak. Pro-union and anti-corporate policies have had a major impact on the health of the Korean economy," Cho added. "The government resorts to short-term measures only to rev up the economy temporarily even though it needs to make a change in its economic policies."
"The Korean government should have taken strong measures such as blocking the entry of Chinese people from the beginning as other major countries such as the United States did,” an analyst said. “But the Korean government has been unwilling to cope with the problem sternly. So we are facing a man-made disaster."