Now the Coronavirus Begins to Hurt Businesses

By Park Jun-young WIRED Korea

The coronavirus epidemic, which broke out in the final month of last year, has had an immeasurable impact on almost all aspects of life around the world. It has changed the way of everyday lives and businesses in the way it was unimaginable several months ago.

Among the most notable changes are protracted lockdowns in so many countries and self-isolation for millions of people confirmed with the virus.

Worse yet, it has been hammering the world economy increasingly hard. Gross domestic product in the United States and China fell 4.8 percent and 6.8 percent, respectively, in the first quarter from a year ago. As a consequence of COVID-19, international trade has virtually come to a halt, and factories are idled, forcing so many people out of jobs.

But Korea, which has succeeded in putting the virus under control, has so far fared better than other members of the Organization of Economic Cooperation and Development, a fraternity of well-to-do nations. Korea’s GDP declined a mere 1.4 percent in the first quarter.

Moreover, credit-rating agencies forecast that the Korean economy will also remain less scathed than other OECD members during the rest of the year. Moody’s, for instance, says Korea’s GDP will mark a 0.5 percent decline in 2020, well above its estimate of an average 4 percent fall for the G20 countries.

But these predictions are of little solace to Samsung, LG and other Korean blue chips, which will have to bear the brunt of the raging pandemic. They say they are beginning to feel the pinch acutely -- a sign that their first quarter earnings are being reversed.

Samsung Electronics had an operation income of 6.4 trillion won on 55 trillion won in sales, up a little less than 5 percent and a little more than 2.7 percent, respectively, from a year ago. LG Electronics did well, too, with an operation income of 1.9 trillion won on 14.7 trillion won in sales.

Due credit must be given to President Moon Jae-in’s administration and, in particular, the Korea Centers of Disease Control and Prevention.

Thanks to their hard work, the daily numbers of confirmed cases have dropped to single digits. Now, people’s daily lives are returning, albeit slowly, to normal.

But Samsung and other exporting corporations believe that the worst has yet to come. Their predictions may not be far off the mark, given that the United States, Europe and other parts of the world are reeling from the impact of the highly contagious respiratory disease.

At an April 29 conference call on earnings, Ben Suh, executive vice president at Samsung, said, “COVID-19 has created unprecedented challenges for the global community. At this point, it is impossible to determine how big an impact it will have or how long it will affect our society and economy, leading to a period of extremely heightened uncertainty.”

Kia Motors feels the same as Samsung. The automaker, whose net profit in the first quarter was cut 59 percent from a year ago, is worried about a plunge in demand, which it says may start in the second quarter. A Kia official says his company will focus its marketing power on new competitive models to tide over the hard times ahead.

Hyundai Motor is working on liquidity risk management, appropriate inventory levels, flexible manufacturing, stable parts and components supplies and other management strategies, all of them geared for the rapidly worsening business environment.

The government is standing by to assist businesses in financial trouble. It is also meeting with industry representatives, university professors and experts from research institutes to craft policies to turn the economy around amid its war against the virus.

The policies on the drawing board are focused on the manufacture of technology-intensive products, a decline in person-to-person contact in business, the Korean models of quarantine and biopharmaceutics as export items and industrial reorganization, to name only a few.

Minister of Trade, Industry and Energy Sung Yun-mo says he is concerned about worsening economic indicators, including the consumer and business survey indexes. “We have to continue a war in the economic front though the COVID-19 is mitigated.”

More importantly, the government is trying to turn the virus-caused economic crisis into a blessing with what President Moon calls a Korean version of the New Deal.

He says his government will launch big-ticket projects, spur growth and create new jobs with an infusion of as much as 135 trillion won. “We will launch large projects that boost employment,” he says. “But we will not stop at creating jobs. Instead, we will also push for innovation-led growth for the upcoming post-coronavirus era.”

Hong Nam-ki, deputy prime minister for economic affairs, says the New Deal will focus on what he calls digital infrastructure, not civil engineering, on which the previous administrations used to rely for job creation during the past economic crises.

He says the New Deal blue print, which he says is set to be finalized by the end of next month, will include an upgrade to the 5G mobile networks, a wider use of artificial intelligence both in the public and private sectors and the use of digital technology in the management of infrastructure, such as roads and railways, and logistics.

Park Jun-young’s Korean–language article is found at "코로나19 보릿고개, 이제부터 시작".

와이어드 코리아=Park Jun-young Staff Reporter sicros@hanmail.net

이 기사를 공유합니다