Coronavirus ‘Red Alert’ in South Korea will hurt the business and economy

South Korea has become the country with the most number of cases of COVID-19 outside China. As per latest reports, South Korea has nearly 500 new coronavirus cases as on Monday (March 2), sending the largest national total in the world outside China past 4,000. The Korea Centres for Disease Control and Prevention (KCDC) said, four more people have died taking the death toll to 22. Meanwhile, the religious movement at the centre of the outbreak in the country said its founder had tested negative for Covid-19, Yonhap reported.

The government of the country has declared a state of ’emergency’ as the entire system grapples to control the deadly virus. This emergency can affect the business and startup community adversely with postponing funding, restrictions on mobility, suspending of events, and an overall slump in the market.

“We’re facing a critical point in the fight against the Coronavirus. The next several days will be an important watershed, and central and local governments, the quarantine authorities and medical sector, and all people must make all-out joint efforts.”

President Moon Jae-in announced on Sunday.

Daegu – the hotbed of COVID-19

The sudden rise in the number of cases is being traced to members of a controversial religious sect of the Shincheonji Church of Jesus in Daegu. As per reports, an infected woman member of the church attended a congregation that triggered the increase in the total number of infections in the country.

Daegu is the fourth largest city of S. Korea and also base of US Army in the country. The city, with about 2.4 million residents, is two hours drive from the capital Seoul. As per a report by the Korea Centers for Disease Control and Prevention of the total number of 602 diagnosed cases, 329 were members of Shincheonji or had had contact with members. Authorities have declared Daegu and its neighboring town as ‘special care zones’ and urged people to avoid travel, stay home and wear masks even indoors.

Focus on Awareness & Prevention methods

Posters regarding awareness of the virus and prevention methods like wearing a mask, washing hands, covering face while coughing, can be seen across the country at public spots like train stations, markets, etc. Most South Koreans are seen wearing masks daily. Hand sanitizers have been placed at public transport stops and building entrances.

Photo: Reuters

The Korean government has set up a central disaster and safety countermeasures with the headquarters under the prime minister. Prime Minister Chung Sye-kyun has assured more supply of hospital beds, medical personnel, and equipment for Daegu and other cities with Coronavirus cases. Public gatherings have been banned, entertainment shows, sports events have been canceled, and the government has shut down public welfare facilities. As preventive measure schools across the nation have postponed the spring semester opening by one week to March 9.

The last time South Korea had faced such a level of public health emergency was when it was hit by the H1N1 influenza virus in 2009.

Impact on business, tourism, and economy

The impact of Coronavirus can put the South Korean economy in a state of recession – one reason being its China-dependent economy and second, being the recent outbreak of the virus threatening to put the country in a lockdown kind of situation. Auto-giant Hyundai is already facing delayed shipments of parts from China, affecting a slowdown in production. Korean mask manufacturers are also facing a shortage of supply material, which is imported mainly from China. Not to mention, many businesses are concerned about the welfare of their employees too, but without employees, business operations are much slower and have to adapt to cope with the virus. It’s likely that many companies are now taking out key person insurances, like those here, to ensure they can cope financially if one of their most valuable employees were to become ill because of the virus, or worse, pass away from the virus.

Korea Exchange (KRX) has reported falling of stock prices of leading banking and securities companies despite good corporate performance in 2019. China buys one-quarter of South Korea’s export, and the chaos around the epidemic has affected the commerce industry adversely.
With the COVID-19 outbreak, travel in the region has faced a huge setback as passenger movement has gone down drastically. The tourism industry of South Korea is also facing a slump with more cancellations. The International Air Transport Association has warned of a drop in earnings of about $29 billion among global carriers, with losses expected to hit airlines in the Asia-Pacific region. There will also be a shortage of workers of Chinese origin.

South Korean government has announced 420 billion won around $356 million as emergency aid plan for businesses, airlines, shipping firms, retailers, and travel agencies facing struggle due to the virus outbreak. However, some market experts believe that this plan might not be enough to revive the losses faced in this phase of the epidemic. In the USA, when businesses are experiencing losses in the face of a disaster, so long as they have business interruption insurance they may be able to do something about it. It remains to be seen how these businesses will cope with their loss of income when the epidemic and lockdown is over and done with.

Apps, gaming industry & online businesses may benefit

While the overall economic condition for S. Korea may look downward for now with the Coronavirus outbreak affecting most businesses, there are opportunities for app makers and game developers to expand their business.

With more people staying indoors, the offline markets definitely will take a hit, but that may work for expanding online commerce. However, for those who are returning back to work, it is not just about adhering to governmental guidelines but It’s also about back to work solutions. The remote work system will be a more popular form of work for startups. Also, the Korean app and game developers can explore the situation by developing relevant games and apps. With more people staying indoors, there is a surge in game downloads as per reports and apps like ‘Corona Contact check’ and ‘Corona-Map’ that help check the ‘virus’ affected are becoming quite popular in South Korea.

There is no clear picture as of now to the end of the COVID-19 outbreak with cases outside of China in countries like Iran, Italy, and South Korea on the rise. The virus outbreak is now bringing a global slowdown for businesses, and the recent resurgence in Korea is sure to have a huge impact on the country’s economy. However, preventive measures, awareness, and the ‘red alert’ handling of the situation may help in lessening the blow.

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