SEOUL (Reuters) - South Korea will inject more dollars into its banking system to ensure businesses have enough funding amid concerns about the deepening global economic impact of the coronavirus pandemic.
The finance ministry and the Bank of Korea announced moves that are expected to beef up dollar supply in the market by $5 billion to $10 billion, as the coronavirus causes chaos in global financial markets and a big demand for U.S. dollars.
Authorities will raise a cap on foreign currency forward positions for local banks to 50% of their equity capital from the current 40% starting on Thursday. For foreign banks, the ceiling will be relaxed to 250% from 200%.
South Korean policymakers have announced a string of measures in recent days, including an emergency interest rate cut and an extra 11.7 trillion won ($9.43 billion) budget, in a bid to reduce pressure on Asia’s fourth-largest economy and keep its financial system operating normally.
The health crisis has soured business and consumer confidence and disrupted manufacturing, with Samsung Electronics and Hyundai Motor temporarily closing plants after a worker tested positive.
And, though the number of new virus cases is declining domestically, they are soaring internationally, raising fears of a global recession.
“We’re in a very grave situation on both aspects of disease prevention and the economy”, President Moon Jae-in told a meeting with economic policymakers.
“The economy is more worrisome, and the people’s livelihood.... The problem is it is difficult to overcome the crisis on our own.”
The Korea Centers for Disease Control and Prevention (KCDC)reported 93 new coronavirus cases on Wednesday. It was the fourth day in a row that there were fewer than 100 new infections, although it was up slightly from 84 the day before.
South Korea now has 8,413 confirmed cases, the KCDC said. The death toll rose by 10 to 91 as of late Wednesday.
But authorities remain on high alert amid concerns about small clusters of infections reported over the past few weeks.
A new outbreak emerged in a nursing home in the hardest-hit city of Daegu this week, with 74 patients having tested positive, while another 55 cases were traced to a Protestant church in Seongnam, south of Seoul, the KCDC said.
Several health ministry officials, including vice minister Kim Gang-lip who hosted daily briefings on the outbreak, were put in precautionary self-quarantine on Wednesday as a hospital chief was confirmed to have contracted the virus after having a meeting with them.
Authorities have launched extensive checks on tens of thousands of high-risk facilities, including nursing homes, hospitals, call centres, computer cafes and karaoke bars in a bid to control the epidemic.
South Korea will also impose tighter border checks for all arrivals from overseas starting Thursday, following recent rises in infected travellers.
The U.S. Embassy in South Korea said on Wednesday it will suspend routine visa services due to virus precautions, in line with a heightened travel advisory from Washington.
Seoul was not advising restaurants and other businesses to shut down for now, but might take stronger action if there are higher risks of broader transmission, KCDC chief Jeong Eun-kyeong said.
“We still need to implement our current policy of social distancing, personal hygiene rules and early testing in a more thorough and practical manner”, she told a briefing.
Reporting by Hyonhee Shin and Cynthia Kim; Additional reporting by Joyce Lee; Editing by Angus MacSwan