[Report] "Customer Foot Traffic Stops" Disaster Relief Fund's Effect Wears Off... Anxious Merchants

One Month After Emergency Disaster Relief Fund Distribution... Small Business Card Sales Decline
Concerns Grow That Consumers Are Closing Wallets as Support Funds Run Out
Experts Say "Cash Support's Stimulus Effect Decreases Over Time"

A street at Jungbu Market, Jung-gu, Seoul, on the morning of the 15th / Photo by Intern Reporter Juhyung Lim skepped@asiae.co.kr

[Asia Economy reporters Seunggon Han and intern Juhyung Lim] "It seemed to be going well, but now people are starting not to come again.", "I guess all the support funds are gone."

On the 15th, merchants met at Jungbu Market in Jung-gu, Seoul, sighed deeply. Although about a month has passed since the emergency disaster relief funds were distributed to boost the domestic economy, which was severely hit by the novel coronavirus infection (COVID-19), concerns are growing that the effect has practically run its course.

In particular, households that have almost exhausted the disaster relief funds may reduce consumption again, increasing anxiety among small business owners.

Experts emphasized that due to the nature of cash support policies, the effect can only be short-term, but as the COVID-19 crisis prolongs, measures to support small business owners and households are necessary.

According to data from 'Korea Credit Data,' which manages card payment information of about 600,000 small business owners nationwide, during the first week of June (1st?7th), the fourth week since the emergency disaster relief funds were distributed, the average sales of small business establishments nationwide recorded 98 when last year's sales for the same period were set to 100. This means that small business sales during this period fell compared to last year.

Nationwide small business card sales showed a gradual recovery starting from the second week of May (11th?17th), when the disaster relief funds began to be distributed. Card sales, which recorded 100 at that time, reached 106 and 104 in the third and fourth weeks, respectively.

However, from June, the first month after the disaster relief funds were distributed, a sharp decline has been observed. This is why some are concerned that the economic stimulus effect of the disaster relief funds might end as a 'flash effect.'

At Jungbu Market, where the reporters visited, merchants also continued to complain that sales have started to decline this month.

An emergency disaster relief fund usage notice is posted at a dried seafood store in Jungbu Market. / Photo by Im Juhyung, intern reporter skepped@asiae.co.kr

A in his 60s, who sells dried seafood, lamented, "(Customers) must have spent all their money. Sales are not increasing as much as last month."

He added, "Last month, it seemed like customers were gathering a bit. But from the beginning of this month, I feel the customers have stopped coming. I think many people have used up their disaster relief funds and started to save."

B (66), who runs a restaurant near the market, sighed, "At first, customers flocked to the market, so I benefited. But after some time passed since the disaster relief funds were distributed, foot traffic has decreased again. Restaurant sales are also declining."

C, a merchant in his 50s dealing with salted seafood, pointed out, "Customers are starting not to come back to the market as they have used up their disaster cards. The market was already in recession before COVID-19. Naturally, when the support funds run out, consumer sentiment must decline."

According to the 'Emergency Disaster Relief Fund Usage Status' announced by the Ministry of the Interior and Safety on the 10th, out of the total 9.5467 trillion won in disaster relief funds distributed by card until the 31st of last month, 5.6763 trillion won has been spent so far. This means about 41.8% of the total 13.5908 trillion won in support funds has been used. Considering the amount used from support funds distributed as gift certificates, the scale of payments is even larger.

Given this situation, there are also forecasts that consumers who have almost used up the disaster relief funds will close their wallets again. Consumers met at the market said they have spent freely so far and intend to save from now on.

A dried seafood store in Jungbu Market on the morning of the 15th. / Photo by Juhyung Lim, intern reporter skepped@asiae.co.kr

D (76), who came to buy seafood, said, "I already spent all the disaster relief funds and now only about 100,000 won is left. I indulged in luxury ingredients that I usually couldn't afford, so I won't be spending a lot of money for a while."

E, a woman in her 30s who came shopping at the market that day, explained, "(The disaster relief funds) have almost all been used, so now I am saving. I have already bought all the necessary groceries, so currently I am only purchasing essential items."

Experts advised that if the economic difficulties caused by COVID-19 prolong, it is necessary to consider additional support measures such as reissuing disaster relief funds.

Professor Gang Namhoon of Hanshin University's Department of Economics pointed out, "Due to the nature of cash support policies like disaster relief funds, the economic stimulus effect naturally decreases as the amount of support decreases. The economic difficulties of small business owners cannot be fundamentally overcome unless the economic crisis caused by COVID-19 ends."

He continued, "If the crisis prolongs, short-term stimulus measures like disaster relief funds will inevitably be needed again. However, improvements such as differentiating the payment amount according to income levels can be considered."

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