Meeting on Macroeconomic Stability and Financial Markets
Government to Prioritize Disease Prevention
1st Vice Minister of Economy and Finance Kim Yong-beom held a Meeting on Macroeconomic Stability and Financial Markets on March 10, 2020 to discuss ways to respond to the impact of the COVID-19 outbreak on the financial market.
Following is a summary of 1st Vice Minister Kim’s keynote address.
Current situation
Global situation
Global supply chains are being disrupted due to the virus outbreak, supply and demand both falling. Production cut failure by OPEC has sent oil prices tumbling, followed by soaring safe asset prices and plunging global stock markets. Concerns growing over financial markets and real economies, central banks of major economies announced base rate cuts last week.
Domestic situation
Domestic financial markets have been affected by global financial markets, foreign funds flowing out of Korea’s stock markets and the won weakening. However, the current volatility is due to the fast spreading disease and its huge impact on the economy, not by structural vulnerabilities or imbalance in the financial sector. I advise not being gripped by too much fear and anxiety.
Korea’s FX reserves amount to US $409.2 billion as of the end of February, net foreign assets in debt instruments reaching US $480.6 billion as of the end of last year. FX liquidity in financial institutions is sound with the FX LCR at 120.6 percent, and we have made US $130 billion worth of currency swap agreements.
The real economy has been shrinking fast led by leisure industries, and consumer and business confidence dropped in February. Production and exports are dim amid global growth concerns and the weakening of global value chains.
Response
The government has put its first priority on disease prevention, believing that there will be no chance of the economy rebounding without a successful disease control. We have increased spending on disease control and small business support, and will work to make the 2020 supplementary budget ready for execution as soon as it is passed at the National Assembly.
A 24-hour monitoring of the financial market will be run, market stabilization measures being made ready for sudden volatility. There will temporarily be expanded bans on stock short selling, of which the details the Financial Services Commission will announce soon. On top of that, the government will fast inform international organizations, global investors and credit rating agencies of accurate and up-to-date data regarding the Korean economy.
Please refer to the attached pdf
