"Overseas Travel Difficult for Korea, Domestic Travel May Revive Consumption"

[Asia Economy Reporter Jeong Hyunjin] Due to the impact of the novel coronavirus infection (COVID-19), which has made it difficult for Koreans to travel abroad, there is a prospect that domestic tourism could help revitalize private consumption. It was analyzed that if one-third of the 41 trillion won spent overseas last year were used domestically, it could offset the loss of foreign tourists' domestic consumption.

Bloomberg Economics recently diagnosed this in a report analyzing the Korean economy titled "Border Closures? How Can Locals Boost Domestic Consumption?" stating, "There are signs that domestic travel is recovering." Bloomberg noted that based on economic indicators released so far, Koreans' overseas consumption in recent years has exceeded foreign tourists' domestic consumption by about 50 to 100%. Under the most ideal scenario, if such consumption is maintained within the country, it would more than offset the losses caused by the decrease in foreign arrivals.

Specifically, the amount spent on overseas travel and passenger transportation last year was 41 trillion won, equivalent to 2% of the Gross Domestic Product (GDP). The amount spent by foreigners domestically last year was about 25 trillion won. Since February, foreign arrivals have significantly decreased due to the impact of COVID-19. Justin Jimenez, an economist at Bloomberg Economics who authored the report, analyzed, "Although the calculation is not easy, simply redirecting one-third of the 41 trillion won Koreans spent overseas last year back into the domestic market could itself offset the decline in consumption."

Bloomberg expects domestic travel to increase during the summer vacation season. According to a recent survey by the Korea Transport Institute (KOTI), 37.8% of respondents said they plan to take a summer vacation, and among them, 98% said they would travel domestically. While the percentage of those planning summer vacations decreased by 3.6 percentage points, the proportion intending to travel domestically increased by nearly 20 percentage points.

However, Jimenez pointed out that whether actual consumption will occur domestically depends on how the COVID-19 situation unfolds. While this could be good news for the Korean government, which encourages domestic travel, the risk of COVID-19 remains. Due to the impact of COVID-19, private consumption decreased by 14 trillion won in the first quarter.

Jimenez noted that household consumption is recovering in the second quarter GDP due to various government consumption support measures, but the recovery in consumption is still in its early stages, and without export recovery, the economy is expected to contract this year. He added, "What the government is quietly focusing on is that if successful, Korea could achieve its long-standing goal of reducing dependence on trade and expanding domestic growth engines."

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