[Deputy Editor's Column] Consumption Contraction Triggered by COVID-19

[Asia Economy Reporter Park Hyesook] As the novel coronavirus disease (COVID-19) crisis prolongs, the local economy is facing a crisis.

According to a survey by the Incheon branch of the Bank of Korea, last month Incheon’s Business Survey Index (BSI) dropped significantly to 53 for manufacturing and 52 for non-manufacturing. When the BSI exceeds the baseline (100), it means more companies evaluate the economy positively, and below 100 means the opposite. Additionally, a Korea International Trade Association survey of 112 Chinese export-import companies found that 64% (72 companies) experienced damages.

The Incheon Chamber of Commerce and Industry cited the expansion of damages to export-import companies, a decrease in container cargo volume at Incheon Port, a decline in passengers at Incheon International Airport, and a sharp drop in sales for self-employed businesses as the current COVID-19 damage status. In fact, from the 1st to the 10th of last month, Incheon Port’s container volume was 51,379 TEU, down 28.1% compared to the same period last year, and from the 1st to the 26th of last month, the number of users at Incheon International Airport was 3.14 million, a 40.8% decrease from the previous year.

The Incheon Chamber of Commerce and Industry stated that local government-level loan recommendations and interest subsidy support for small business owners are insufficient, and they are demanding government-level support measures such as reductions in national and local taxes, rent reductions for national and public land (such as airports and ports), temporary allowance of extended working hours, and facilitation of entry for business trips from countries with entry restrictions.

Consumer sentiment has also sharply frozen due to the impact of COVID-19. According to the February Consumer Sentiment Survey recently announced by the Bank of Korea, the Consumer Confidence Index (CCSI) was 96.9, down 7.3 points from the previous month, a decline comparable to that during the MERS outbreak. Local governments are competing to increase benefits of local currencies to stimulate consumption, which has been contracted due to COVID-19.

Goesan County in Chungbuk increased the discount rate of local currency from the existing 6% to 10%, and provides an additional 5% discount when used at 'Euddeum Stores' selected by the county. Busan City decided to extend the 10% cashback event for the local currency 'Dongbaekjeon,' which was scheduled to end at the end of last month, until the 31st of this month. Incheon City will expand the cashback rate of the local currency card 'Incheon e-eum' for two months from March to April, providing 10% cashback for amounts under 500,000 KRW per month. Sejong City is considering expanding the issuance scale of the local currency 'Yeominjeon,' to be launched on the 3rd, from 7 billion KRW to 30 billion KRW, more than tripling it.

Additionally, some companies, public institutions, and military units designate days off for their cafeterias to encourage the use of local restaurants, and some local governments are suspending 24-hour parking enforcement on surrounding roads to revitalize traditional markets.

There are also reports that public anxiety about COVID-19 surpasses that of MERS, and concerns are being raised that if the current situation continues, corporate production activities will stagnate to an irreversible level. Apart from the government’s practical support measures for economic recovery, it seems necessary for each individual to maintain personal hygiene and pursue wise consumption activities rather than being overwhelmed by excessive fear.

This content was produced with the assistance of AI translation services.