Bank of Korea Warns Shutdown Could Cause 30 Trillion Won in Losses
The central bank has warned that a general strike by Samsung Electronics’ labor union could reduce the country’s economic growth rate by approximately 0.5 percentage points.(Businesskorea DB)
The central bank has warned that a general strike by Samsung Electronics’ labor union could reduce the country’s economic growth rate by approximately 0.5 percentage points. Given South Korea’s heavy dependence on semiconductor exports, a halt in operations at the country’s key production facilities is expected to deal a severe blow to the national economy as a whole.
According to the Bank of Korea on May 18, the central bank recently compiled a report analyzing the economic ripple effects under various Samsung Electronics labor union strike scenarios. The report assumes a worst-case scenario in which the union launches a general strike beginning on May 21 for 18 consecutive days and memory semiconductor production lines are completely halted.
The Bank of Korea estimated that restoring production lines to normal after a shutdown would take approximately three weeks. The damage from semiconductor production disruptions during that period is estimated at approximately 30 trillion won (approximately $20.13 billion). This is a scale large enough to pull down the year’s overall economic growth rate by 0.5 percentage points, raising concerns that it could throw cold water on the recent recovery in exports.
South Korea’s economy has recently secured growth momentum on the back of strong memory semiconductor exports. Any production disruption at Samsung Electronics, the world’s number one player in the global memory market, goes far beyond a single company’s problem, exerting downward pressure on national growth, exports, and financial markets as a whole.
The report was in fact shared with the heads of major financial authorities at the Market Situation Review Meeting, known as the F4 Meeting, held on May 14. The meeting was attended by the Minister of Economy and Finance, the Governor of the Bank of Korea, the Chairman of the Financial Services Commission, and the Governor of the Financial Supervisory Service, who conducted an intensive review of the strike risk.
Participants agreed that if the Samsung Electronics strike were to materialize, it would pose considerable risk not only to the real economy but also to financial markets. An official said, “The issue needs to be resolved as quickly as possible through principled negotiations between labor and management,” underscoring the need for an early end to the situation.
Jung Suk-yee
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