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By Park Yoon-bae
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The first thing we have to pay attention to is a plan by the Bank of Korea (BOK) to introduce quantitative easing. On March 26, the central bank decided to supply "unlimited" liquidity to banks and financial firms by purchasing local bonds in repo operations by the end of June.
The purpose of this unprecedented measure is to prevent a credit crunch in the face of the COVID-19 crisis. The BOK has so far supplied the market with 11.8 trillion won ($9.7 billion), helping regain financial stability to a certain degree. But before the virus outbreak, such an unconventional monetary policy was unthinkable.
In fact, Asia's fourth-largest economy had refrained from adopting quantitative easing. Even during the 1997-98 Asian financial turmoil and the 2008 global financial crisis, South Korea had never employed such a radical step.
Therefore it can be said that the new coronavirus crisis is far more serious and catastrophic than any previous calamities. Actually no one had expected that any contagious disease such as COVID-19 would bring about this perfect storm.
That is why the pandemic demands unconventional emergency measures to contain the virus and minimize its crippling impact on the economy and the people's lives. Novel ideas and creative thinking are crucial to fighting the novel and destructive virus.
As things stand, COVID-19 is not simply causing a health crisis. It is also bringing about an economic tsunami. The problem is how we can develop ways of containing the deadly virus and its devastating shock on the economy.
However, it is somewhat encouraging to see the silver lining in the pandemic cloud. South Korea is emerging as a global model in coping with COVID-19. This might be a direct result of a hard lesson the country learned from the Middle East Respiratory Syndrome (MERS) outbreak in 2015 which infected 186 people and killed 38.
Since then the country has managed to establish a well-functioning quarantine network and beefed up its overall healthcare system. It has now fared well to check the spread of the coronavirus with its capacity of testing, tracing and treating patients, without taking radical measures such as lockdowns and entry bans. Its strengths lies in transparency, openness and democratic principles as President Moon Jae-in stressed.
Yet it is still too early to tell if the country has succeeded in bringing the virus under control. The global pandemic crisis will have a reverberating effect on the economy for long even after the virus disappears. Thus, the Moon administration should leave no stone unturned to prevent the economy plunging into an abyss.
Aside from the Korean-style quantitative easing, the Moon government has come up with a massive economic rescue package worth 100 trillion won ($82 billion) to help hard-hit businesses, especially small and medium enterprises and the self-employed. It has also decided to offer "emergency disaster relief money" for people in the bottom 70 percent income group. The total sum of state support could go up to 150 trillion won when other aid is included.
The massive stimulus package was also unthinkable before the COVID-19 outbreak. But now it is more than necessary to ride out the looming economic woes. Yet few can become confident that it is good enough to bail out the worsening economy. If necessary, the amount could be increased.
But policymakers should make concerted efforts to avoid making a mistake of injecting "helicopter money" into a bottomless pit without achieving intended effects of economic stimulus. They also must strive to prevent populism from finding its way to the provision of financial support for businesses and individuals.
It is reckless and irresponsible for the ruling and opposition parties to make populist pledges to offer more relief money to all citizens regardless of their income levels during the campaign period for Wednesday's general election.
The election is over. But it has left a bad aftertaste: raging populism which is another case of the previously unthinkable becoming a reality. Populism may help the rival parties and their candidates garner more votes. But it could cause national debt and a budget debt to surge to dangerous levels.
What's for sure is that we are not in a mood for euphoria ― not at all ― for making the impossible possible. We are only at the entrance of a dark, gloomy tunnel. But we have to go through that tunnel whatever it takes to find the light at the end. This is a crucial test for all people the world over.
The author (byb@koreatimes.co.kr) is the chief editorial writer of The Korea Times.
