Korean economy could shrink 1% due to coronavirus outbreak—ADB

SEOUL — Assuming the worst-case scenario regarding the ongoing new coronavirus outbreak, South Korea could see its GDP contract by as much as 1 percent this year, according to the Asian Development Bank.

In its latest report “The Economic Impact of the COVID-19 Outbreak on Developing Asia,” the multilateral agency suggested four possible scenarios to assess the economic fallout that the fast-spreading epidemic may have on major Asian economies.

The categories were classified into best-case, moderate-case, worst-case and hypothetical-worst case scenarios.

In the moderate scenario, which anticipates restrictions such as travel bans that could last about three months, global losses could reach $156 billion, or 0.2 percent, of global gross domestic product. China will account for $103 billion, while the rest of Asia will lose $22 billion.

The worst-case scenario, however, claims that China will see both consumption and investment drop at least 2 percent over six months and that other ADB member countries will also have a tangible impact.

In that case, Korea will likely see its GDP shrink $16.5 billion this year — equivalent to 1.02 percent of its 2018 amount. The number of jobs may also decrease by around 357,000.

The dilemma for Asia’s fourth-largest economy is that the pessimistic scenario may be realistic. The spread of the epidemic here has been on a fast run since the first outbreak confirmed on Jan. 20, with the number of confirmed patients totaling 7,134 as of Saturday.

The Composite Consumer Sentiment Index for February already marked a 7.3 point drop on-month to 96.9. A reading below the benchmark 100 means pessimists outnumber optimists.

“There are many uncertainties about COVID-19, including its economic impact,” said Yasuyuki Sawada, chief economist at ADB.

“This requires the use of multiple scenarios to provide a clearer picture of potential losses. We hope this analysis can support governments as they prepare clear and decisive responses to mitigate the human and economic impacts of this outbreak.”

As of the first week of March, the infection rate of COVID-19 around the globe came to the 1.5-3.5 percent range, while the fatality rate was estimated at 1-3.4 percent, according to the ADB report.

ADB is slated to update its coronavirus-related assessments in its April edition of its outlook, officials said.