COVID-19 IN SOUTH KOREA: BEHIND THE SOARING NUMBERS - CHIANG Min-Hua & Ryan HO EAI Background Brief No. 1516

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COVID-19 IN SOUTH KOREA: BEHIND THE SOARING NUMBERS - CHIANG Min-Hua & Ryan HO EAI Background Brief No. 1516
COVID-19 IN SOUTH KOREA: BEHIND
                     THE SOARING NUMBERS

                           CHIANG Min-Hua & Ryan HO

                           EAI Background Brief No. 1516

Date of Publication: 12 March 2020
Executive Summary

1.   As of 11 March 2020, South Korea remained high on the chart of infected countries
     with 7,755 confirmed cases of COVID-19 and 60 deaths. At least 60% of infection
     involves members of the Shincheonji Church of Jesus, a Christian cult group.

2.   The outbreak started on 18 February after a confirmed case spread to 455 more cases
     among the Shincheonji group. On 23 February, the government raised the COVID-
     19 alert level to the highest: “Red”.

3.   The coronavirus outbreak is the most critical challenge faced by President Moon
     Jae-in after taking office in 2017. As of 29 February, more than a million people had
     signed a petition to impeach President Moon for mishandling the outbreak of
     COVID-19.

4.   The Moon government did not ban travellers from Hubei province, the epicentre of
     COVID-19 until 4 February 2020, a relatively late response compared to those of
     its neighbouring countries. The Moon administration considered banning Chinese
     travellers as impractical given Korea’s strong reliance on the Chinese economy.

5.   South Korea’s economic growth had slowed down from 2.7% in 2018 to 2% in 2019
     due to the US-China trade war and trade conflict with Japan. The quick virus spread
     is intensifying the pressure on the feeble economy.

6.   China is South Korea’s biggest trading partner, chief investment destination and
     main source of inbound tourism. The slowing down of China’s production due to
     the virus spread is likely to have significant impact on Korea’s manufacturing
     economy.

                                             i
7.    South Korea’s export-oriented economy is further challenged after Vietnam, the
      second most important overseas production site for South Korean firms after China
      has imposed travel restrictions on South Korean travellers and suspended airline
      operation between the two countries.

8.    The opposition party is painting the Moon government as incompetent in handling
      the virus spread in view of the upcoming parliamentary election in mid-April.
      Currently the ruling party (Democratic Party or Minjoo Party) still holds the
      majority (129 out of 300 seats) in the parliament.

9.    The Moon government plans to provide 30 trillion won (S$3.49 billion) to stimulate
      the economy in response to the potential contraction in private consumption and
      exports. However, the positive effect from extra government spending could be
      limited if the virus spread continues.

10.   The number of COVID-19 cases could continue to rise in the coming weeks. As
      such, ensuring sufficient medical goods for the potentially large number of patients
      and providing adequate protection gears for the medical staff appears to be the most
      pressing challenge for the government.

                                               ii
COVID-19 IN SOUTH KOREA: BEHIND THE SOARING NUMBERS

                                  CHIANG Min-Hua & Ryan HO ∗

                                Sudden Outbreak in South Korea

1.1     As of 11 March 2020, South Korea had reported 7,755 COVID-19 cases (Figure 1),
        the highest in Asia after China. Sixty people had died from the virus. Sixty-four per
        cent of confirmed cases were in Daegu, a city with 2.5 million population (Figure 2).

1.2     South Korea’s first COVID-19 case was discovered on 20 January 2020. A 35-year-
        old female Chinese national, residing in Wuhan city, China was detected when
        walking past the thermal scanners at the Incheon airport . 1

1.3     Until 18 February, the country had only 31 cases and no deaths due to the virus.
        During this period, the general mood among the South Korean public was one of
        confidence in the country’s emergency preparedness for a possible outbreak of the
        virus in the community.

1.4     The situation changed dramatically within a week after 18 February when the
        number of cases spiked to more than a thousand within the country. The South
        Korean government has identified a cult known as the New Heaven and New Earth
        (or Shincheonji Church) as the trigger for this outbreak. 2

∗
       Dr Chiang Min-hua is research fellow at the East Asian Institute, National University of Singapore.
Ryan Ho is a research assistant with the same institute.
1
        “Wuhan virus: South Korea confirms first new case of coronavirus in Chinese visitor”, The Straits
Times, 20 January 2020  (accessed 27 February 2020).
2
         A female member of this church in the Daegu branch who was identified as the country’s 31st case
had no prior overseas travel history or contact with other confirmed cases. However, she is believed to be a
“super-spreader” as she was connected to another 455 cases among the Shincheonji group nationwide. The
                                                     1
FIGURE 1                            NUMBER OF COVID-19 CASES IN SOUTH KOREA
   9000

   8000

   7000

   6000

   5000

   4000

   3000

   2000

   1000

      0                                                                                                 11-Feb
                                                                                                                 13-Feb
                                                                                                                          15-Feb
                                                                                                                                   17-Feb
                                                                                                                                            19-Feb
                                                                                                                                                     21-Feb
                                                                                                                                                              23-Feb
                                                                                                                                                                       25-Feb
                                                                                                                                                                                27-Feb
                                                                                                                                                                                         29-Feb

                                                                                                                                                                                                                                  10-Mar
                                                                1-Feb
                                                                        3-Feb
                                                                                5-Feb
                                                                                        7-Feb
                                                                                                9-Feb
          20-Jan
                   22-Jan
                            24-Jan
                                     26-Jan
                                              28-Jan
                                                       30-Jan

                                                                                                                                                                                                  2-Mar
                                                                                                                                                                                                          4-Mar
                                                                                                                                                                                                                  6-Mar
                                                                                                                                                                                                                          8-Mar
     Source: Korea Centres for Disease Control and Prevention.

                                                                        FIGURE 2                        SOUTH KOREA’S MAP

    Source: “Coronavirus: South Korea ‘emergency’ measures as infections increase”, BBC News, 21
    February 2020,  (accessed 1 March 2020).

Shincheonji Christian group in South Korea was founded in the 1980s. It is not a mainstream Christian sect
in South Korea but claims to have around 250,000 followers nationwide; the Daegu branch of the church has
9,336 members. The cult followers believe that Lee Man-hee, founder of Shincheongi, is the second coming
of the returned Jesus Christ (Messiah).
          “A controversial religious group is at the center of South Korea’s coronavirus outbreak”, CNN, 22
February 2020  (accessed 27 February 2020).
                                                                                                                  2
1.5      With the rapid growth of confirmed cases, the Korea Centres for Disease Control
         and Prevention (KCDC) announced on 23 February that the government had raised
         the COVID-19 alert level to “Red” to strengthen the overall response system. 3

1.6      The Daegu branch of the church embraces churchgoers from not only Daegu, but
         also other parts of the country. This has made it difficult for the government to trace
         all Shincheonji members who visited the branch in Daegu. 4

1.7      According to South Korea’s ministry of justice, 42 Shincheonji members had
         travelled from Wuhan to South Korea from 1 July 2019 to 27 February 2020. There
         were 357 Shincheonji members based in Wuhan. 5

1.8      The South Korean public has been critical of the Shincheonji group as the spike in
         cases has been continually linked to members of the sect. 6 The initial uncooperative
         attitude of the group in assisting health authorities efforts to contact members,
         coupled with an online post detailing the Shincheonji’s alleged plans to spread the
         virus to traditional churches, had led to public anger and mistrust of the sect.

1.9      The public anger, a result of the quick spread of COVID-19, has also led to the
         political backlash against the Moon Jae-in government. On 29 February, more than

3
         “South Korea raises virus alert to highest amid soaring COVID-19 cases”, Xinhua News, 23 February
2020  (accessed 27 February 2020). The
last time South Korea raised the alert level to “red” was in 2009 when an outbreak of the H1N1 influenza
virus led to around 250 deaths in the country. Song Jung-a, “South Korea’s president warns of coronavirus
watershed”, Financial Times, 23 February 2020,  (accessed 1 March 2020).
4
         This was made worse by the uncooperative attitude of the Shincheonji sect in its refusal to turn in
member directories and contact lists to the health authorities. “More than 550,000 sign petitions to dissolve
sect at centre of coronavirus outbreak in South Korea”, The Straits Times, 25 February 2020,
 (accessed 27 February 2020).
5
        Paula Hancocks, Yoonjung Seo and Jessie Yeung, “Shincheonji director denies responsibility for
South Korea coronavirus infections”, CNN News, 1 March 2020,  (accessed 1 March 2020).
6
          “More than 550,000 sign petitions to dissolve sect at centre of coronavirus outbreak in South Korea”,
The Straits Times, 25 February 2020,  (accessed 27 February 2020).
                                                      3
one million people had signed a petition that called for the impeachment of President
         Moon due to his administration’s late response to ban travellers from China and to
         supply enough surgical masks to the general public. 7

1.10     The Moon government was reluctant to close the border to China due to its high
         dependency on China. Ironically, keeping its doors open to travellers from China
         have facilitated the highly infectious pathogen spread, further undercutting the
         chances of an economic recovery. 8

1.11     The impact from COVID-19 has gone beyond economics and politics. More than
         20 security guards at the Blue House, the executive office and official residence of
         the South Korean president, had to be quarantined. Confirmed cases are also
         reported in Korea’s navy, air and land forces. 9

1.12     The Seoul city government filed a legal complaint to prosecutors against 12 leaders
         of the sect on 1 March 2020. 10 They are accused of homicide, causing harm and
         violating the Infectious Disease and Control Act for hiding the identities of its
         members and risking further infections in the public.

7
          Da-Sol Goh, “Moon Jae-in impeachment call unlikely to fly”, Asia Times, 28 February 2020,
 (accessed 29 February 2020).
8
        Choe Sang-Hun, “South Korean leader said Coronavirus would disappear. It was a costly error”, The
New York Times, 27 February 2020,  (accessed 1 March 2020).
9
         As a result, K-pop and public events have been cancelled or postponed due to concerns over the virus
spread. “South Korea rose to 242 cases in two days, military personnel and Blue House security guard are
requested for quarantine”, World Journal, 22 February 2020,  (in Chinese,
accessed 29 February 2020).
10
         “Coronavirus: South Korea sect leader to face probe over death”, BBC News, 2 March 2020,
 (accessed 2 March 2020).
                                                     4
1.13     On 4 March 2020, South Korean President Moon Jae-in followed the Chinese
         Communist Party (CCP) rhetoric by declaring “war” on the virus. 11 Thus far, the
         only country to have declared war on the virus is China.

1.14     With the COVID-19 virus already spreading among members of the Shincheonji,
         and coupled with the cult’s headquarters in Gwacheon, near Seoul, there is a concern
         that the virus could spread to the residential communities of the capital city.

                            National Mobilisation against COVID-19

2.1      The South Korean government had been preparing for an outbreak of the virus in
         the country in view of the growing cases in Wuhan and other parts of China since
         late 2019. 12

2.2      After the first confirmed case, the South Korean government had raised the
         coronavirus alert level from Blue to Yellow on 21 January. Seven days thereafter,
         the alert level was raised to orange, with 29 national designated hospitals announced
         to isolate the confirmed and suspected cases (Figure 3).

2.3      However, all these measures were vastly inadequate when the number of cases
         began to spike after a community outbreak centred around the Shincheonji Church
         branch in Daegu was reported (Figure 3).

11
         On 11 February, Chinese President Xi Jinping declared a “people’s war” against the COVID-19 virus,
see  (accessed 5 March 2020).
12
          Before the spike in COVID-19 cases in the country, the South Korean government had already begun
to closely monitor the movements of travellers from China, including tracking their credit cards, checking
CCTV footage of their whereabouts and mandating the report of their health status every day. For the infected,
the public could trace the movement of every individual with coronavirus on an interactive website. “South
Korea tracks virus patients travels and publishes them online”, The Wall Street Journal, 16 February 2020,

(accessed 28 February 2020).
                                                      5
FIGURE 3          SOUTH KOREA’S ALERT LEVEL CRITERIA

                       • Virus spread in communities across the country
          RED          • 23 Feb with 602 confirmed cases

             • Confined spread of virus within the country
      ORANGE • 28 Jan with four confirmed cases

              • Doemstic importation of virus from abroad
       YELLOW • 21 Jan with the first confirmed case

                       • Confirmed cases from abroad with no immediate threat to the
         BLUE            country

      Source: Korea Centres for Disease Control and Prevention.

2.4       After the outbreak, the southern cities of Daegu and Cheongdo (a county in North
          Gyeongsang province), with reported clusters of infections, have been declared as
          “special care zones” where the government would devote more resources to tackle
          the outbreak. 13

2.5       As part of the emergency measures to contain the spread of virus within the country,
          the South Korean government has revised an infectious disease act to fine people up
          to three million won (S$3,450) for refusing to test for the virus and limiting the
          export of face masks to 10% of the output. 14

13
          “South Korea designates Daegu, Cheongdo as ‘special care zones’ over coronavirus”, The Korea Herald,
21 February 2020,  (accessed 28 February 2020);
“South Korea declares new ‘special care zone’ amid 438 new COVID-19 cases”, CAN, 5 March 2020,
 (accessed 5 March 2020). On 5 March, the government declared another “special care zone” around
Gyeongsan which has seen a spike in new cases. These include sending military medical staff, and providing
temporary isolation facilities and necessary assistance like sickbeds and equipment to the affected areas.
14
        “Petition to impeach Moon over South Korea handling of coronavirus as cases hit 1261”, The Straits
Times, 26 February 2020,  (accessed 28 February 2020).
                                                                  6
2.6     Unlike China’s lockdown of several cities to contain the virus spread, South Korea
        has not put any curbs on internal movement; instead it is testing hundreds of
        thousands of people from clinics to drive-through stations. 15

2.7     Following rumours circulated on the internet that Kimchi (cabbages fermented with
        spices), a traditional Korean dish, could prevent the infection, South Korean health
        officials quickly clarified that there was no basis behind these claims. 16

2.8     The outbreak of COVID-19 has also affected military operations in the country.
        After 25 South Korean military personnel contracted the virus, the defence ministry
        decided to ban all soldiers from taking leave, leaving their barracks and receiving
        guests, essentially a lockdown on military facilities.

2.9     South Korean health authorities collaborated quickly with local biotech companies
        and researchers to develop test kits based on a genetic sequence of the virus released
        by China in mid-January. 17

2.10    In a short space of time, South Korea has managed to test more than 140,000 people
        for the coronavirus, using kits with sensitivity rates of over 95%. 18

2.11    Local and central governments have forged a consensus to cooperate as evidenced
        by the nationwide test kit checks in Seoul and Daegu. It is being done throughout
        Seoul and in other cities like Daegu as requested by the central government.

15
         “Coronavirus testing blitz appears to keep South Korea death rate low”, The Straits Times, 5 March
2020,  (accessed 5 March 2020).
16
          “Some people think Kimchi can fight the 2019 Coronavirus”, Nextshark, 4 March 2019,
 (accessed 5 March 2020).
17
         “ Coronavirus testing blitz appears to keep South Korea death rate low”, The Straits Times, 5 March
2020      (accessed 5 March 2020).
18
        Ibid.
                                                     7
2.12    Nevertheless, the quick virus transmission has gone beyond the government’s
        capacity. The aggravating hospital bed shortage in Daegu has emerged as the most
        pressing issue in South Korea’s current efforts to fight against the COVID-19. 19

2.13    There is also a shortage of facemasks in stores throughout South Korea. 20 Frontline
        doctors and medical personnel working round the clock in Daegu have also voiced
        concerns with the lack of protective suits. 21

2.14    The South Korean health authorities would have to work fast to limit the spread of
        the COVID-19 to within Daegu and North Gyeongsang province. The spread to big
        cities like Seoul, Busan and Incheon would be catastrophic and damaging to South
        Korea.

         Close Economic Ties with China and South Korea’s Belated Response

3.1     The Moon administration has come under fire for its late ban of travellers from
        China. At the end of January, the total 11 confirmed cases were either Chinese
        nationals from Wuhan or Koreans with travel history to Wuhan. Nevertheless, Korea
        did not ban Chinese travellers from Hubei province until 4 February. 22

3.2     In January 2020, 480,000 Chinese visitors arrived in South Korea, a 23% increase
        compared to the same month in 2019.23 The number of Chinese visitors only largely
        decreased after the outbreak of COVID-19 cases in Korea.

19
       Park Han-na, “Measures on Daegu hospital shortage coming: Prime minister”, The Korea Herald, 1
March 2020,  (accessed 1 March 2020).
20
        “[Editorial]: Shortage of masks”, The Korea Herald, 4 March 2020,  (accessed 5 March 2020).
21
         “[Herald Interview] Doctors face test of endurance in Daegu”, The Korea Herald, 4 March 2020,
 (accessed 5 March 2020).
22
       In comparison, Taiwan has started to ban travellers from Hubei province of China since 26 January,
Hog Kong since 27 January, Singapore since 29 Januaryand Japan since 1 February.
23
        Data source: CEIC.
                                                   8
3.3        South Korea’s economic reliance on China explains the government’s reluctance to
           restrict tourism exchange between the two countries in the beginning. In 2019,
           China and Hong Kong accounted for 31% of Korea’s total exports. 24

3.4        South Korea’s export-oriented economy has decelerated due to the US-China trade
           war since 2018 and trade conflict with Japan since 2019. The Moon administration
           has expected the economy to recover after the easing of US-China trade war (Figure
           4). 25

           FIGURE 4        SOUTH KOREA’S ECONOMIC GROWTH RATE (YOY) 2016-2020
         4.0

         3.5

         3.0

         2.5

         2.0
     %

         1.5

         1.0

         0.5

         0.0
                2017H1          H2          2018H1   H2       2019H1   H2      2020H1       H2
      Note: Estimates for 2020 H1 and H2.
      Source: Bank of Korea.

3.5        In 2019, South Korea’s total exports declined by over 10% with semiconductor
           products (drop by 25%) and exports to China (drop by 16%) suffering the most
           significant decline among all major export items and destinations. 26 In January 2020,

24
           Data source: CEIC.
25
          Kim Jaewon, “South Korea economy set to pick up in 2020”, Nikkei Asian Review, 2 January 2020,

(accessed 5 March 2020).
26
           Data source: KOSIS.
                                                          9
South Korea’s exports continued to fall, with the exports of transport equipment and
                           chemical products heading the list. 27

3.6                        Despite the mounting wages in China, the country remains the largest investment
                           destination for Korean firms. In 2019, Korean firms invested US$4.5 billion in
                           China, ahead of its investment in the United States (US$3.7 billion), Europe
                           (US$2.3 billion) and ASEAN+India (US$2.7 billion). 28

3.7                        China is also the most important contributor to South Korea’s booming tourism
                           industry in recent years (Figure 5). Before the dispute over deployment of Terminal
                           High Altitude Area Defence (THAAD), China accounted for 47% of foreign visitors
                           to South Korea in 2016.

                       FIGURE 5          SOUTH KOREA’S VISITORS AND TOURISM REVENUE 2009-2019
                      20                                                                                                            2.0

                      18                                                                                                            1.8

                      16                                                                                                            1.6

                      14                                                                                                            1.4

                      12                                                                                                            1.2
     Million people

                      10                                                                                                            1.0   US$Billioin

                      8                                                                                                             0.8

                      6                                                                                                             0.6

                      4                                                                                                             0.4

                      2                                                                                                             0.2

                      0                                                                                                             0.0
                              2009    2010     2011     2012   2013     2014      2015        2016   2017      2018      2019
                                     Tourism revenue (RHS)       No of total visitors (LHS)          No of Chinese visitors (LHS)
                 Source: CEIC Data.

27
        Jung Suk-yee, “South Korea’s export conditions deteriorate in January”, Business Korea, 27
February 2020,  (accessed 20
February 2020).
28
                           Data source: Korea Exim bank.
                                                                         10
3.8     For China, South Korea is an important travel destination, after Japan and Thailand
        in 2019 by the number of trips. Before the controversy over THAAD, South Korea
        is the second most popular destination for the Chinese traveller, only after
        Thailand. 29

3.9     Chinese visitors to Korea have started to surge again since 2018 after the dispute
        over THAAD was settled. In 2019, Chinese visitors to South Korea increased again
        to nearly six million (Figure 5).

3.10    South Korea is also one of the most popular choices for studies for Chinese students.
        In 2019, about 71,000 Chinese students registered in Korean universities,
        accounting for 44% of total foreign students in Korea. 30

3.11    Apart from Chinese travellers to Korea, the close bilateral economic ties are also
        evidenced by the large number of Korean people travelling to China. During the
        2009-2019 period, about four million Korean people travelled to China every year. 31
        In 2017, 24% of Korean visitors to China were for business. 32

3.12    Overall, given its geographic proximity and China’s increasing influence in the
        world, South Korea’s economy has been unavoidably dependent on China. The
        Moon administration, for the sake of the country’s economy, was reluctant to
        decrease economic exchanges with China.

29
        Hong Kong and Macao are excluded. “Tourism flow in China”, Euromonitor, September 2019.
30
          “No. of international students rises to all-time high in S. Korea”, Pulse, 30 August 2019,
 (accessed 28 February 2020).
31
        Data source: CEIC.
32
        The Yearbook of China Tourism Statistics 2018, Ministry of Culture and Tourism of the People’s
Republic of China, Beijing, 2018.
                                                 11
Potential Economic Backlash

4.1     Due to the quick virus spread, the Bank of Korea (BOK) cut the economic growth
        forecast for 2020 from 2.3% to 2.1% on 27 February 2020. Credit rating agency
        Moody’s lowers South Korea economic forecast even more to 1.9%. 33

4.2     South Korea’s exports have suffered from the US-China trade war. The slowing
        down of manufacturing production in China due to the widespread transmission of
        COVID-19 in several Chinese cities is likely to substantially reduce their demand
        from Korean manufacturers.

4.3     Apart from the slowing down of exports, the domestic manufacturing production
        may also be affected by production suspension of industrial goods from China. In
        2019, 22% of Korean imports were from China, two thirds of which were industrial
        input for manufacturing production in Korea. 34

4.4     Japan is another important source of imports for Korean manufacturers, particularly
        machinery and chemical related products. A reduction in supply would significantly
        impact Korea’s manufacturing production.

4.5     Domestic industrial production could be affected due to the spread of COVID-19 in
        the country. Samsung Electronics and Hyundai Motor have temporarily ceased
        factory operation after workers have been confirmed to have contracted COVID-
        19. 35

33
         “Moody’s cut S.Korea’s 2020 growth outlook to 1.9% over virus fallout”, The Korea Herald, 17
February 2020  (accessed 27 February 2020);
The lingering impact of COVID-19 affects the business prospects as well. Some Korean firms (eg; E-mart,
LG) have their credit rating downgraded by Moody’s and other rating agencies. Son Ji-hyoung, “Weak
earnings, coronavirus fears weigh on Korean firms’ credit”, The Korea Herald, 18 February 2020,
 (accessed 29 February 2020).
34
        Data source: CEIC.
35
        Kim Da-sol, “Hyundai Motor’s Ulsan plant halts due to confirmed COVID-19 case”, The Korea
Herald, 28 February 2020,  (accessed 28
February 2020); “South Korea companies prepare for worst after Samsung virus case”, The Business Times,
                                                  12
4.6     Consumer sentiments towards domestic economic conditions have been the lowest
        since September 2019, particularly on current living standards, future household
        income and future spending which has also fallen since January 2020. 36

4.7     Another hard hit area would be Korea’s tourism industry. Several countries have
        issued travel advisory for South Korea. As of 5 March 96 entry bans or stricter
        quarantine procedures for people from South Korea have been imposed in many
        countries or territories. 37

4.8     According to the Korea Economic Research Institute, the COVID-19 outbreak may
        cost Korea up to 78,000 jobs in the tourism sector. Tourist arrivals are likely to drop
        by 1.65 million along with a drop in tourism revenue by 4.6 trillion won (US$3.9
        billion). 38

4.9     The Moon administration plans to inject massive stimulus to rescue the economy hit
        by the COVID-19. He also announced plans to provide 30 trillion won (S$3.49
        billion) in funds to fight the virus and called for a “bold fiscal injection” to avoid
        negative impact on the economy. 39

24 February 2020,  (accessed 28 February 2020).
36
         “Consumer survey for February 2020”, Bank of Korea, 25 February 2020,

(accessed 27 February 2020).
37
         Song Sang-ho, “Australia to impose entry ban on people from Korea on Thursday”, Yonhap News
Agency, 5 March 2020, 
(accessed 5 March 2020).
38
        The estimates are based on the conditions that COVID-19 has developed to the extent similar to
Middle East Respiratory Syndrome (MERS) outbreak in 2015. “COVID-19 crisis could hit S. Korea’s tourism
sector hard, says think tank”, Nam News Network, 12 February 2020,  (accessed 1 March 2020).
39
         “Moon declares war on coronavirus as South Korean cases cross 5,000”, The Straits Times, 4 March
2020, 
(accessed 5 March 2020).
                                                    13
4.10    Despite the potential impact on the economy, BOK continues to maintain the policy
        rate at 1.25%. For BOK, providing financial support to firms to combat the business
        recession is more important than rescuing the economy through adopting a low
        policy rate.

4.11    Besides, it is still unclear as to how the COVID-19 will change the Korean economic
        trajectory and there are concerns that lowering the rates would worsen the already
        overheated property market. 40

4.12    The government’s expansionary fiscal policy is expected to alleviate the potentially
        huge impact on the economy. However, if the spread of COVID-19 prolongs,
        economic recovery will be delayed.

                     Moon’s Political and Diplomatic Challenges Ahead

5.1     With the spike in confirmed cases, Moon’s approval rating fell to 42% according to
        a survey by Gallup Korea at the end of February 2020. 41 This is a clear decline from
        about 50% in January 2020 and 70% in 2017. 42

5.2     Moon’s popularity has started to decline due to the unfruitful diplomacy with
        North Korea and stagnant economy. China’s support was therefore important to
        the Moon administration politically and economically.

40
        “Bank of Korea stands pat despite coronavirus hit to growth view”, The Straits Times, 27 February
2020,  (accessed 1 March 2020).
41
          Kim Jaewon, “South Korea’s Moon faces biggest political test over virus outbreak”, Nikkei Asian
Review, 5 March 2020,  (accessed 5 March 2020).
42
         “Ratings of South Korea’s Moon take a hit from Virus outbreak”, The New York Times, 28 February
2020, 
(accessed 1 March 2020).
                                                   14
5.3     On 20 February, Moon pledged South Korea’s endless support for China’s fight
        against the coronavirus and reconfirming the upcoming summit with the Chinese
        president. 43 It was the same day when Korea reported its first death from COVID-
        19 and more than 730,000 people signed a petition calling for a ban on travellers
        from China.

5.4     Some Koreans also slam Moon for sending three million face masks to China, while
        Koreans are deprived of masks because of soaring prices and lack of stock. The
        public’s anger spiked again when they learned that some Chinese cities had begun
        quarantining South Korean visitors upon landing at their airports, while South Korea
        had not done so for Chinese travellers.

5.5     Critics said that South Korea has suffered from prioritising relations with China over
        public health. The opposition party is attempting to paint Moon as incompetent in
        the lead up to the National Assembly election in mid-April. 44

5.6     The current ruling party (Democratic Party or Minjoo Party) holds a majority (129
        out of 300 seats) in the parliament whereas the newly formed opposition United
        Future Party (UFP) holds 113 seats. The April parliamentary elections will be
        important for Moon’s final two years in office. 45

5.7     In response to critics, President Moon claimed that South Korea has improved its
        system compared to the outbreak of Middle East Respiratory Syndrome (MERS) in

43
         Suki Kim, “How South Korea lost control of its coronavirus outbreak”, The New Yorker, 4 March
2020 
(accessed 5 March 2020).
44
         Kyle Ferrier, “Coronavirus now poised for outsized impact in South Korea”, The Diplomat, 28
February 2020, 
(accessed 1 March 2020).
45
          Mitchell Blatt, “Coronavirus could shake up South Korea’s big April”, The National Interest, 28
February 2020,  (accessed 2 March 2020).
                                                    15
the country in 2015. Unlike during the MERS period, the current Korean
        government reveals all information to the public. 46

5.8     The US-South Korea alliance is facing challenges too. The two countries decided to
        postpone upcoming joint military drills after US and Korean soldiers contracted the
                 47
        virus.        There are 28,500 US troops in South Korea, one of the largest
        concentrations of US army personnel in a single foreign country. 48

5.9     The Moon administration’s New Southern Policy hit a snag with the travel
        restrictions for Koreans travelling abroad and foreigners visiting Korea following
        the growing cases of COVID-19. It may not reach the target of 15 million travellers
        between South Korea and ASENA+India in 2020 in its New Southern Policy. 49

5.10    Vietnam is the most important country in South Korea’s New Southern Policy in
        terms of trade and investment. With the COVID-19, apart from restricting entry of
        Korean visitors to Vietnam, Vietnam airlines have suspended all flights to South
        Korea since 3 March. 50 Other Vietnamese airlines have also followed suit.

46
       “COVID-19 in South Korea: Shincheonji, President imprechment and fake news”, BBC News, 2
March 2020,  (in Chinese, accessed 6 March 2020).
47
        Ryan Browne and Paula Hancocks, “US-South Korean combined military drill postponed over
coronavirus outbreak”, CNN News, 27 February 2020,  (accessed 1 March 2020).
48
        Edward White, “Coronavirus: US locks down largest overseas army base”, Financial Times, 28
February 2020,  (accessed March 1
2020).
49
         Important countries in South Korea’s New Southen Policy, such as India, Singapore, Malaysia and
the Philippines, have banned Korean travellers from entering their countries.
50
        Vietnam has also temporarily cancelled the “visa waiver programme” for Korean visitors since 29
February 2020. Ahn Sung-mi, “Some 200 South Koreans forced into isolation in Vietnam”, The Korea Herald,
1 March 2020,  (accessed 4 March 2020).
                                                   16
5.11    The number of confirmed cases in South Korea is expected to soar in the coming
        days as the health authorities in Korea continue their test of more than 210,000
        Shincheonji members in other provinces. 51

5.12    South Korea is experiencing the most critical challenge which could impact
        negatively on the country’s economy, domestic politics as well as its national
        security. The coming weeks will be crucial to determining how COVID-19
        ultimately impacts the country. 52

51
          “S. Korea reports 1 more coronavirus death, total infection top 3,400”, Yonhap News, 1 March 2020,
 (accessed 2 March 2020).
52
         Kyle Ferrier, “South Korea now has the most cases outside of China and the government is ramping
up efforts to respond”, The Diplomat, 28 February 2020,  (accessed 1 March 2020).
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