Political 'Dispute' Over Coupon Policy... What About the Economy Amid COVID-19 Resurgence?

Government Issues Coupons Worth 170 Billion Won for 8 Sectors Including Accommodation, Dining, and Movies
Social Distancing Raised to Level 2...Distribution Temporarily Suspended After 3 Days
Ruling Party: "Consumption Coupon Policy Unrelated to Resurgence" vs Opposition: "Careless Policy, Hindering Quarantine"
Bank of Korea: "Recovery Expected to Weaken Due to Domestic COVID-19 Resurgence"
Experts: "Various Measures Should Be Discussed to Minimize Economic Losses"

The government has prepared measures to stimulate consumption, including providing eight major discount consumption coupons, to alleviate the economic downturn caused by the impact of the novel coronavirus infection. Photo by Yonhap News

[Asia Economy Reporter Kim Suwan] As the government’s '8 Major Consumption Coupons' policy, which was promoted to revitalize the domestic economy amid the resurgence of the novel coronavirus infection (COVID-19), was ultimately halted, political circles are embroiled in disputes over the government’s coupon project. Critics argue that the consumption coupon policy, proposed as part of the government’s 'COVID-19 Overcoming Measures,' actually hindered quarantine efforts.

In particular, although the consumption coupons were expected to improve the domestic economy, the resurgence of COVID-19 has made recovery uncertain, leading to continued public concern over economic deterioration.

Experts suggest that to minimize economic losses caused by COVID-19, it is necessary to strengthen policies or find alternative measures.

On the 25th, the Culture, Sports and Tourism Committee held a plenary session at the National Assembly to discuss the 2018 fiscal year settlement and the approval of supplementary budget expenditures for the 2019 fiscal year of the Ministry of Culture, Sports and Tourism and the Cultural Heritage Administration.

On this day, opposition parties criticized the government for hastily pushing the coupon project amid the increasing number of COVID-19 confirmed cases.

Choi Hyungdoo, a member of the Future United Party, pointed out, "COVID-19 is more uncertain than weather forecasts, but the government was in a situation of loosening its response. From the morning of the 14th, new confirmed cases exceeded 100. Despite the quarantine authorities hinting at the possibility of raising the alert to level 2, the government pushed ahead with coupon issuance."

Another member of the same party, Bae Hyunjin, cited reasons such as the government not suspending coupon issuance on the day reports emerged that a confirmed case had visited a movie theater in Yongsan, and not halting the workplace vacation support project, claiming it was "an act of obstructing quarantine by the government."

Independent lawmaker Yoon Sanghyun said, "The government’s 8 major coupon policy undermined the public’s quarantine awareness and became a trigger for the resurgence of COVID-19. The policy was swayed by political logic." He added, "Director Jeong Eun-kyung said on the 7th that stronger quarantine measures were needed, but the government ignored it."

On the other hand, the ruling party rebutted that the COVID-19 resurgence was unrelated to the consumption coupons and was due to the Gwanghwamun rally and Sarang Jeil Church. Park Jung of the Democratic Party said, "There was no major problem until the 14th, but the cumulative confirmed cases began to increase after the 14th and suddenly surged from the 15th. Confirmed cases emerged at Sarang Jeil Church, with a total cumulative number of 875. Also, 176 confirmed cases were linked to the Liberation Day rally. These people are not related to the coupons, are they?"

Park argued that there is insufficient correlation between coupon issuance and the increase in COVID-19 confirmed cases. He emphasized, "It is necessary to accurately inform the public that the increase in confirmed cases was due to the Gwanghwamun rally and Sarang Jeil Church, not because coupons were issued."

The Ministry of Culture, Sports and Tourism stated that the coupon project was conducted under strict quarantine rules and posed no problems. Minister Park Yangwoo said, "We have been preparing since May and have been promoting it while strictly adhering to quarantine rules. It is incorrect to say that the coupon project went against quarantine."

The government has prepared measures to stimulate consumption, including providing eight major discount consumption coupons, to alleviate the economic downturn caused by the impact of the novel coronavirus infection. Photo by Yonhap News

Earlier, on the 14th, the government prepared to issue coupons worth about 170 billion won in eight sectors including accommodation, dining, movies, exhibitions, performances, and sports facilities. This support was planned to revive the domestic market, which had been depressed due to COVID-19, and to spread a new normal and safe leisure culture among the public. In particular, the government expected a consumption stimulation effect of about 1 trillion won through coupon issuance.

In fact, consumption, which had been sluggish due to social distancing and decreased household income, rebounded thanks to such government support measures. According to the Ministry of Strategy and Finance’s 'Recent Economic Trends (Greenbook) for August 2020,' domestic card approval amounts increased by 4.8% in July compared to a year earlier.

However, as COVID-19 confirmed cases surged in Seoul and the metropolitan area on the 15th, and quarantine authorities raised the social distancing level to level 2 in the metropolitan area, public criticism arose that it was inappropriate for the government to encourage travel and dining out.

Consequently, the Ministry of Agriculture, Food and Rural Affairs and the Ministry of Culture, Sports and Tourism temporarily suspended the coupon issuance policy just three days after it began.

The Ministry of Agriculture announced on the 15th that it would temporarily suspend dining activation campaigns at midnight on the 16th following the social distancing level upgrade in Seoul and Gyeonggi Province. Previously, from the 14th, the ministry had started a campaign where if a customer paid more than 20,000 won five times on weekends using a credit or debit card at dining establishments, they would receive a 10,000 won refund (cashback or billing deduction) on the sixth payment.

The Ministry of Culture, Sports and Tourism also decided to temporarily suspend the implementation schedule of six types of consumption discount coupons that had been issued since the 14th. For example, online reservations at domestic accommodations offered discounts of 30,000 to 40,000 won, and movie tickets booked online allowed a discount of 6,000 won for up to two tickets per person per week.

However, the government decided that since the timing of accommodation and travel discount coupons’ reservation and actual use differ, those already booked would proceed as scheduled under strict quarantine, but future distributions would be temporarily suspended.

A large supermarket in Seoul shows a quiet scene. Photo by Yonhap News

The problem is that with the suspension of the planned consumption coupon issuance due to the impact of COVID-19, there is a growing possibility of consumption contraction, raising concerns about economic deterioration.

In fact, the economic shock caused by COVID-19 has affected household incomes across all income groups, including low-income, middle-income, and high-income households.

According to the '2nd Quarter Household Income Trends Survey' released by Statistics Korea on the 20th, the average monthly earned income of households with two or more members nationwide from April to June this year was 3.22 million won, down 180,000 won (-5.3%) from 3.4 million won in the 2nd quarter of 2019. This is the first time since statistics began in 2003 that earned income in the 2nd quarter decreased compared to the same period the previous year. As income decreases, consumption inevitably contracts.

As a result, there are forecasts that the economic recovery in South Korea will weaken as COVID-19 spreads again. The Bank of Korea stated in a report to the National Assembly’s Planning and Finance Committee on the 24th, "The domestic economy showed some signs of improvement as export and consumption slumps eased, but the resurgence of domestic COVID-19 infections is expected to weaken the recovery."

Given this situation, voices are emerging that alternative measures for economic revitalization are needed until the COVID-19 situation stabilizes.

A 27-year-old office worker A said, "When the COVID-19 situation stabilized, the government provided movie and travel coupons, so I dined out and went to the movies often. Because of the discounts, I ended up spending money. But now, with the number of confirmed cases rising, face-to-face activities have become impossible. Local merchants are also complaining that the economy is very bad. I think the government should quickly come up with another consumption promotion plan."

There are also reactions that the government’s complacent response worsened the economy. Another office worker B (29) said, "Although the policy was well-intentioned, people went to crowded places and spent money when quarantine efforts should have been prioritized. This led to a lax attitude toward social distancing. The policy was halted due to COVID-19 infections, but the manpower and costs spent on this policy must have been considerable. Ultimately, all of this will affect the economy," he pointed out.

Experts suggest measures such as issuing non-face-to-face consumption coupons, focusing on self-employed businesses hit hard by COVID-19.

Professor Lee Eunhee of Inha University’s Department of Consumer Studies said, "Discussions are underway regarding the second disaster relief fund, but I believe consumption coupons would be more helpful for stimulating consumption. Unlike disaster relief funds, they lead to actual purchases and thus more consumption activities. Therefore, the economic impact would be significant."

She added, "Although the coupons were suspended due to COVID-19, switching to non-face-to-face methods to revitalize the economy would be a good approach. It would be desirable to issue coupons mainly for sectors of self-employed businesses severely affected by COVID-19," she suggested.

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