Bank of Korea: "Possibility of Consumption Rebound Suppressed by Corona... Will Be Affected by Vaccine Distribution"

Bank of Korea 'BOK Issue Note - Examining the Possibility of Future Pent-up Consumption'

[Asia Economy Reporter Kim Eunbyeol] As 'pent-up consumption' resumes following the suppression of spending due to the spread of COVID-19, an analysis suggests that private consumption will gradually improve in the future.

On the 26th, the Bank of Korea stated in the 'BOK Issue Note - Reviewing the Possibility of Future Pent-up Consumption' that "pent-up consumption, which was suppressed due to this crisis, is expected to revive and contribute to consumption improvement," adding, "Past domestic and international cases show a pattern where consumption, which had contracted during a crisis, rapidly increases during economic recovery."

It is estimated that the reduction in consumption caused by restrictions on economic activities last year accounted for about 4 percentage points of annual private consumption, and this portion is likely to be revived as pent-up consumption in the future.

In particular, the Bank of Korea analyzed that as household income and employment conditions improve in the future, income uncertainty is expected to decrease, and the sensitivity of consumption to infectious disease spread is likely to weaken, which will support the resumption of pent-up consumption.

However, the Bank of Korea also analyzed that the unusually large increase in durable goods consumption during this crisis could slow the pace at which pent-up consumption revives. Durable goods consumption has significantly exceeded recent long-term trends, so the momentum for further increases may weaken.

Additionally, the expansion of savings mainly among high-income groups with low consumption propensity and the possibility that households' risk-averse tendencies may increase due to this crisis were also cited as factors that could constrain pent-up consumption.

Lee Yongdae, head of the Bank of Korea's Survey Department's General Survey Team, forecasted, "Pent-up consumption is expected to gradually materialize going forward, but since this crisis is an unprecedented health crisis, the future spread of COVID-19 and the vaccination rollout situation will be the main influencing factors."

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