"Revive Domestic Demand" Government Issues Temporary Holiday Card as Disaster Relief Fund Effect Fades

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kim Hyunjung] The government has launched efforts to boost domestic consumption by using the "temporary holiday" card. This decision comes as the effect of the emergency disaster relief funds distributed in May to respond to the novel coronavirus infection (COVID-19) is wearing off, and there is a need for an additional trigger to stimulate consumption. It is also forecasted that the total production inducement amount resulting from the designation of this temporary holiday will exceed 4 trillion won.

On the 21st, President Moon Jae-in announced through a Cabinet meeting held at the Blue House that August 17th would be designated as a temporary holiday. This decision was made in anticipation of a synergistic effect with the consumption coupons issued through the third supplementary budget and the full-fledged summer vacation season, amid the prolonged COVID-19 situation beyond initial expectations. In particular, the government considered that there are no holidays until the Chuseok holiday at the end of September, which could deepen the domestic demand slump. For the same reason, during the Middle East Respiratory Syndrome (MERS) outbreak, the government designated August 14, 2015, and May 6 of the following year as temporary holidays to stimulate economic recovery. On this day, President Moon explained the background by saying, "We want to provide a short but precious rest time to the people exhausted by the prolonged COVID-19 situation. We also took into account that the number of holidays to rest was reduced as Memorial Day and Liberation Day fell on weekends."

On the 8th, during the ongoing Korea Together Sale event, Namdaemun Market in Jung-gu, Seoul, is bustling with citizens. Photo by Mun Ho-nam munonam@

If August 17th is designated as a temporary holiday instead of August 15th, which is Liberation Day and falls on a Saturday this year, it is forecasted that the total production inducement amount will reach 4.2 trillion won, and the number of jobs induced will be 36,000. The Hyundai Research Institute predicted this economic ripple effect in a report titled "Economic Ripple Effects of Designating August 17 as a Temporary Holiday," released on the 20th, following remarks by Prime Minister Chung Sye-kyun about the temporary holiday designation. First, assuming that 25 million people, half of the total population, will take the day off, and based on consumer prices and past (2011) survey data, the daily expenditure per person was estimated at 83,690 won, with the composition of consumption expenditure assumed to be accommodation (23.9%), transportation (28.2%), food (34.1%), and entertainment and culture (13.8%).

Furthermore, assuming that the industrial linkage effects and employment inducement effects from the 2018 extended input-output tables remain valid today, the total consumption expenditure for one day, August 17th, is estimated to reach 2.1 trillion won, and the ripple effect on the entire economy is expected to be around 4.2 trillion won. By industry, the food service industry and its related sectors are expected to benefit the most, with an estimated production inducement amount of 1.55 trillion won and 14,100 jobs induced. Other industries are expected to see accommodation and related sectors at 1.08 trillion won and 9,900 jobs, transportation and service industries and related sectors at 1.05 trillion won and 7,900 jobs, and arts, sports, and leisure-related industries and related sectors at 520 billion won and 4,100 jobs.

Park Yong-juk, Senior Researcher of the Industrial Analysis Team at Hyundai Research Institute, commented on the government's measure, saying, "The prolonged COVID-19 has accumulated fatigue among the public and medical staff, and the total number of holidays in 2020 is fewer than usual, which were considered, along with the purpose of revitalizing domestic consumption." He evaluated it as "an important measure in an unprecedented economic crisis situation." However, he also explained, "If leisure and tourism activities increase mainly in domestic regions, it will bring production inducement effects not only to the service industry but also to manufacturing and other industries. However, from the corporate perspective, there may also be short-term negative impacts due to fixed cost expenditures caused by the suspension of production activities."

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