"Sigh~ COVID cases rise again and interest rates jump"… Office workers tighten their wallets

Interest Rates Rise Again, Sighs
Social Distancing Expected to Tighten Due to COVID Resurgence
Experts Say "Consumption Likely to Remain Weak Until Year-End"

On the 12th, with 37,360 new COVID-19 cases reported, marking the first time in 55 days that the number has fallen into the 30,000 range, citizens lined up to get tested at a screening clinic set up at Mapo-gu Public Health Center in Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporters Jang Se-hee and Oh Gyu-min] "We need to reduce dining out and eat meal kits in multiple portions," "We have to cut costs on beauty expenses like clothes and cosmetics." With high interest rates, soaring prices, and the spread of COVID-19 overlapping, office workers are tightening their wallets.

Cutting immediate expenses... but what about loan repayments amid interest rate hikes?

On the 13th, compiling reports from Asia Economy, the possibility of returning to social distancing combined with the effects of interest rate hikes is causing people to reduce current consumption. Kim Mi-hee (33, pseudonym), who plans to refrain from dining out, said, "Since interest rates keep rising to control inflation, I worry first about the loan repayments I have to make every month. I plan to start by cutting food expenses." Jang Hee-soon (39, pseudonym) said, "It's already tight to repay my credit loan immediately, and the interest rates have gone up again. After subtracting loan payments from my monthly expenses, I have about 600,000 won left for living costs," adding, "I have no capacity to spend money on grooming and dressing up."

Kim Moon-soo (25, pseudonym) was planning to take body profile photos ahead of summer vacation and visited a gym but turned to home training instead. Kim said, "With new COVID-19 cases expected to reach 50,000 to 60,000, if operating hour restrictions are imposed again, I think I would actually suffer losses." Lee Ji-hyun (37, pseudonym) said, "Due to discussions about revising social distancing, I changed my vacation plans to domestic travel," adding, "Changing the destination from Jeju Island to Gapyeong saved me about 800,000 won."

At the current pace, there is a high possibility that the COVID-19 resurgence, which had been gradually decreasing, will flare up again. Prime Minister Han Duck-soo also stated on the same day, "If there is a significant change in the epidemic situation, we will consider selective and phased social distancing." This means that if new cases rapidly increase, strengthening social distancing will be inevitable. In fact, the number of new COVID-19 cases surpassed 30,000 for the first time in 55 days the day before.

High prices, interest rates, and strengthened social distancing... 'Consumption contraction' expected to continue until year-end

Experts believe that the spread of COVID-19 and rising interest rates will directly affect consumption.

Professor Lee Eun-hee of Inha University’s Department of Consumer Studies said, "High prices primarily contributed to changing consumption behavior, but interest rate hikes and the resurgence of COVID-19 also caused consumers to reduce spending," adding, "(Consumers) are looking for ways to maintain the satisfaction they used to get from consumption while cutting expenses." She continued, "The consumer sentiment index exceeded 100 until May but dropped below 100 from June, indicating a contraction in consumption, and this trend is expected to continue until the end of the year," emphasizing, "If consumption contracts, it will naturally be difficult for the economic situation to improve."

Professor Kim Tae-gi of Dankook University’s Department of Economics said, "Both COVID-19 and interest rate hikes act as negative factors for consumption activities," but added, "I think controlling inflation is urgent, so interest rates were raised first."

Professor Kim Sang-bong of Hansung University’s Department of Economics also said, "Due to the learning effect from the COVID-19 resurgence, actual consumption may not decrease significantly," but noted, "However, consumption going to offline and self-employed sectors is decreasing, which could cause damage to those areas."

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