Prolonged 4th Wave of COVID-19... Government States "Continued Domestic Demand Uncertainty"

[Sejong=Asia Economy Reporter Son Seonhee] As the fourth wave of COVID-19, which began in early last month, has prolonged, the government recently assessed that uncertainty in the domestic economic situation continues.

The Ministry of Economy and Finance analyzed in the 'Recent Economic Trends August Issue' published on the 20th, "Recently, our economy has maintained a solid export boom and improving employment trends, but uncertainty related to domestic demand continues, especially in face-to-face service industries due to the resurgence of COVID-19."

In the second quarter, domestic demand showed an overall recovery trend with improvements in employment and consumption indicators. However, with the start of the fourth wave of COVID-19 last month, the government once again mentioned 'economic uncertainty,' and this diagnosis has continued for two consecutive months.

Kim Young-hoon, head of the Economic Analysis Division at the Ministry of Economy and Finance, said, "Externally, the global economic recovery continues in major countries, but concerns about inflation and the spread of the Delta variant persist," adding, "Under thorough quarantine measures, we will make every effort to minimize economic shocks and maintain economic recovery while ensuring proactive price management and livelihood stabilization."

Despite the resurgence of COVID-19, consumption improvement trends continued last month, with sales increasing in department stores, discount stores, and online channels. The domestic card approval amount in July also rose by 7.9% compared to the same month last year, expanding the increase for three consecutive months following May (5.5%) and June (7.6%).

Regarding this, Kim explained, "In past (COVID) spread periods, total card sales mostly turned negative, but this time it shows somewhat better performance," and added, "It seems that the relatively small decrease in mobility during this spread period compared to the past influenced this." He further noted, "As online consumption continues to expand, consumption behavior of economic agents has adapted to COVID-19, which is estimated to have somewhat reduced the impact on consumption."

However, he said, "It is difficult to conclude the impact on domestic demand solely based on card preliminary indicators," and added, "Negative effects seem inevitable as the consumer sentiment index fell for the first time in seven months in July." Kim also said, "Looking at each industry, face-to-face service sectors are recording negative figures," and "Since the damage from the fourth wave of COVID-19 is concentrated in face-to-face service industries, it is judged that difficulties for self-employed and small business owners continue."

The consumer sentiment index in July recorded 103.2, declining for the first time in seven months after steadily rising since December last year. The number of Chinese tourists visiting Korea last month increased by 34.7% compared to a year ago, but this increase was significantly smaller than the previous month (116.3%).

The domestic financial market saw stock prices and government bond yields fall, and the exchange rate rise, due to strengthened preference for safe assets amid the domestic and international resurgence of COVID-19.

In July, the housing market saw an expansion in the rate of increase for both sale prices (June 0.79% → July 0.85%) and jeonse prices (June 0.45% → July 0.59%) compared to the previous month.

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