Due to the Spread of COVID-19, South Korea's Consumer Sentiment Drops the Most Among OECD Countries

Due to the impact of COVID-19, consumer sentiment is shrinking, and on the 11th, Lotte Mart Seoul Station branch in Jung-gu, Seoul, is showing a quiet scene. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Kwangho Lee] Due to the spread of the novel coronavirus infection (COVID-19), domestic consumer sentiment has been found to have dropped the most among the member countries of the Organisation for Economic Co-operation and Development (OECD). The problem is that the rapid increase in confirmed cases centered around Daegu began in late February, so it is expected to decline further in March, making short-term recovery difficult.

According to the OECD on the 12th, South Korea's Consumer Confidence Index (CCI) last month fell by 0.4 points from the previous month (100.0) to 99.6. The decline was the largest among the 25 OECD countries for which data collection was completed.

The OECD calculates and publishes the CCI, which adjusts various psychological indices released by each country, including the Bank of Korea's Consumer Sentiment Index, to allow for cross-country comparison. A value below 100 indicates that consumers view the economy and employment trends pessimistically.

The country with the second largest drop in CCI after South Korea was Turkey (95.2→94.9). Japan (99.0→98.9), where confirmed cases continued to increase on cruise ships, saw only a 0.1-point decline. The rapid freezing of consumer sentiment in South Korea is interpreted as a result of its proximity to China and the emergence of COVID-19 confirmed cases from the end of January.

According to the Korea Federation of Credit Finance and others, movie theater attendance in the third week of February decreased by 57% compared to a year earlier, and amusement park visitors plummeted by 71.3%. As consumers reduced appointments and refrained from going out, sales at department stores, food and lodging businesses also declined.

South Korea's CCI ranks 20th among the 25 countries. Countries with lower index levels than South Korea include Australia (99.4), Sweden (99.2), Japan (98.9), Finland (98.7), and Turkey (94.9). The results announced this time did not include China's consumer sentiment index. Also, the Eurozone survey was conducted in early last month, so the impact of the recent rapid increase in confirmed cases centered in Italy is considered to be less reflected.

Experts and institutions believe that even if the spread of COVID-19 subsides, consumer sentiment will be difficult to recover immediately. Hyunju Kang, a research fellow at the Korea Capital Market Institute, observed, "Even if the impact of COVID-19 is resolved, workers' wage losses due to business closures will be significant, resulting in a lack of purchasing power."

The Korea Development Institute (KDI) diagnosed that the overall Korean economy has recently contracted sharply due to the spread of COVID-19. In the 'Economic Trends for March 2020,' KDI forecasted, "The Consumer Confidence Index (CCSI) and the Business Survey Index have plunged, and the negative impact of COVID-19 is spreading to domestic demand." In fact, according to the 'February Consumer Sentiment Survey Results' announced by the Bank of Korea on the 25th of last month, the CCSI dropped sharply to 96.9 from 104.2 in the previous month. Considering that the survey period (February 10?17) did not include the mid-February period when confirmed COVID-19 cases surged, the contraction in consumption appears to be even more severe.

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