In an emergency response to the latest stock market plummeting in the United States, the South Korean government on Tuesday warned that the ongoing coronavirus pandemic could possibly expand into an “unprecedented” economic crisis.

“We should take into account that the spread of COVID-19 may lead to an unprecedented complex crisis situation for both the real economy and the financial market,” said Kim Yong-beom, first vice minister of finance, in an urgent meeting with macroeconomic officials at the Seoul Government Complex.

In light of the ongoing epidemic, there is the possibility of increased negative impact upon the real economy and expanded volatility in the financial market, according to the vice minister.

“Despite the exceptional monetary easing by the US, the heightened uncertainty caused by COVID-19 has continued to disturb investor sentiment,” he said.

“It turns out eventually that thorough quarantine is the key to stabilizing the financial market.”

The vice minister’s remarks came as the US stock market reeled under a record-breaking crash Monday, as the coronavirus took an exponential uptrend in the US and Europe.

Overnight, the US Dow Jones Industrial Average crashed 12.93 percent to 20,188.52 points, marking its worst daily plunge ever since 1987. The tech-heavy Nasdaq also slipped 12.32 percent to 6,904.59 points in a historic dip. The S&P 500 hit a level-one circuit breaker with a 7 percent loss, immediately upon market opening.

Taking impact from the extensive crash, Korea’s main bourse Kospi started off Tuesday at 1,640.84, down 4.32 percent from the previous day’s closing and dipping below the psychologically significant 1,700 point mark.

While vowing preemptive risk management actions and market stabilizing actions whenever necessary, however, the senior fiscal official also urged against excessive anxiety.

“We shall make preemptive check-ups on potential risk factors in each sector of the financial system, and take market stabilizing actions in a swift and stern manner on the right time,” Kim said, calling for all-out efforts to prevent a credit crunch.

“(But) considering our economy’s sound fundamentals, policy response capacity and improved financial system, there is no need to express too much alarm.”

Also, citing the central bank’s latest base rate cut and the international society’s move to build up a fiscal cooperative system with leading economies, Kim displayed confidence in the speedy recovery of the market.

On Monday, leaders of the Group of Seven nations vowed to “do whatever is necessary” to battle the effects of the coronavirus.

“We resolve to coordinate measures and do whatever it takes, using all policy tools, to achieve strong growth in the G7 economies, and to safeguard against downside risks,” they said in a joint statement.

Meanwhile, the Bank of Korea held an emergency session of its rate-setting Monetary Policy Board to approve a 50 basis point cut of the country’s base interest rate. The action brought the policy rate to an unprecedented 0.75 percent from the already record-low 1.25 percent.

By Bae Hyun-jung (tellme@heraldcorp.com)