[Weekly Review] Disaster Relief Payments Begin on the 11th... Consumption Declines While Exports Recover

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is entering the briefing room at the Government Seoul Office in Jongno-gu, Seoul on the 29th to announce customized damage support measures in response to the spread of COVID-19, including emergency disaster relief funds. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Kim Bo-kyung] The government will provide the third round of disaster relief funds starting from the 11th to small business owners and vulnerable employment groups affected by the spread of the novel coronavirus infection (COVID-19). Due to the contraction in domestic demand caused by COVID-19, retail sales have declined for two consecutive months. The consumer price inflation rate recorded a historic first of two consecutive years in the 0% range. Exports in December last year increased by double digits (12.6%), boosting the total annual exports.

◆ COVID Disaster Relief Fund of 9.3 trillion won: "To be executed with speed" = A total of 5.8 million people, including small business owners and special-type workers (special employment types) affected by the third wave of COVID-19, will receive 9.3 trillion won in funds. The relief measures consist of ▲ 5.6 trillion won for emergency damage support for small business owners and vulnerable employment groups ▲ 800 billion won for strengthening COVID-19 quarantine measures ▲ 2.9 trillion won for customized support packages. Approximately 7.7 trillion won will be provided in cash and in-kind support, and 1.6 trillion won in loan support.

Small business owners whose sales have decreased due to the strengthening of social distancing measures will receive cash payments ranging from 1 million to 3 million won, and vulnerable employment groups such as special-type workers and freelancers will receive 500,000 to 1 million won. Additionally, 90,000 home visit and care service workers and 80,000 corporate taxi drivers will each receive 500,000 won. The unpaid leave allowance support period for special support industries such as the travel industry will be temporarily extended by 90 days from the original 180 days to 270 days. In this case, they can receive an additional 1.5 million won over three months, at 500,000 won per month.

The government plans to start payments for major cash support projects from the 11th after the Cabinet meeting on the 5th. Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki said, "This customized support fund is effectively equivalent to the fifth supplementary budget this year," adding, "The most important thing is to execute it with speed."

◆ Consumption declines for two consecutive months... Industrial production rises 0.7% = Consumption contracted for two consecutive months due to the impact of COVID-19. According to Statistics Korea, retail sales in November last year decreased by 0.9% compared to the previous month, marking a decline for two consecutive months following October (-1.0%). The decline was largely due to reduced sales of semi-durable goods such as clothing (-6.9%) and durable goods such as passenger cars (-0.4%).

Total industrial production increased by 0.7% compared to the previous month. Industrial production has shown a pattern of alternating increases and decreases monthly: August (-0.8%), September (2.3%), October (-0.1%), and November (0.7%). The 0.3% increase in manufacturing production had the greatest overall impact on the real economy. Semiconductor production led manufacturing output with a 7.2% increase in November. Service sector production rose 0.7%, marking the third consecutive month of growth. The rise in stock prices and real estate prices contributed to increases in financial and insurance services (4.6%) and real estate (3.3%). However, sectors such as accommodation and food services (-2.7%), health and social welfare (-0.8%), and wholesale and retail (-0.3%) were sluggish due to the spread of COVID-19.

[Image source=Yonhap News]

◆ Two consecutive years of low inflation in the 0% range... But the perception is 'uncertain' = The consumer price inflation rate recorded 0% for two consecutive years for the first time in history. According to the consumer price trends for December and the annual report released by Statistics Korea, the consumer price index last year was 105.42 (2015=100), a 0.5% increase compared to the previous year. Following 0.4% in 2019, this marks two consecutive years in the 0% range. This is the first time since the consumer price statistics survey began in 1965. The low inflation phenomenon was largely influenced by the COVID-19 situation, which caused prices for services such as dining out to fall, and continued low oil prices. Government welfare policies such as free education also suppressed the inflation rate.

However, fresh food items such as agricultural, livestock, and fishery products rose sharply. The "fresh food index," which is calculated based on 50 items with significant price fluctuations due to weather conditions, including fish, shellfish, vegetables, and fruits, jumped 9.0% compared to the previous year. This is the largest increase since 2010 (21.3%). As grocery prices rose, ordinary citizens found it difficult to feel the effects of low inflation. The living cost index rose 0.4% last year, double the previous year's (0.2%).

◆ Exports decreased 5.4% last year... December showed record-breaking performance = According to the Ministry of Trade, Industry and Energy's announcement on the 1st, South Korea's export value in 2020 was 512.85 billion dollars, down 5.4% from the previous year. The poor performance was due to the global economic slowdown, reduced trade, and low oil prices caused by the spread of COVID-19. However, the significant rebound in export performance in December last year is a consolation. December exports recorded 51.41 billion dollars, a 12.6% increase compared to the same period last year. This is the sixth highest performance ever and the highest December export value in history. It was the first time in 26 months that total exports increased by double digits. Considering the number of working days, the average daily export also increased by 7.9%. The average daily export value of 2.14 billion dollars is also the highest this year. Among the 15 major export items, 11 recorded positive growth, including semiconductors (30%), wireless communication devices (39.8%), ships (105.9%), and bio-health (104.4%).

Despite the prolonged COVID-19 crisis, South Korea's exports showed a clear recovery trend in the second half of last year. Especially in the fourth quarter of last year, both export value and growth rate achieved the highest performance in two years. After exports plummeted in the second quarter with the third largest quarterly decline ever (-20.3%), they quickly turned positive. An official from the Ministry of Trade, Industry and Energy evaluated, "While major countries experienced simultaneous export slumps, our exports performed relatively well."

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