Lockdown-level social distancing takes a heavy toll on the Korean economy | HaB Korea.net

Lockdown-level social distancing takes a heavy toll on the Korean economy

“The Aug. 15 rally nearly destroyed my business,” said a man surnamed Kim, an owner of a traditional Korean eatery in Jongno, downtown Seoul. He said the recently heightened COVID-19 warning level has nearly hammered his once-booming business backed by many regulars, most of whom were office workers from nearby Gwanghwamun.


The guidelines on social distancing were raised to the second-highest “Level 2,” Aug. 19, days after many firms reinstituted a work-from-home policy driven by a surge in new infections from participants in the Aug. 15 Liberation Day rally in Gwanghwamun.

The distancing rule further raised to level 2.5 is effective from Aug. 30 through Sept. 6., with additional advisories recommending that residents in Seoul, Incheon, and the surrounding Gyeonggi Province stay home and all gatherings being canceled. Eateries and bakeries cannot provide indoor services after 9 p.m. ― only take-out orders can be offered between 9 p.m. and 5 a.m. “My regulars are and will stay gone for weeks to come, tanking my business. I thought the worst had passed after March and April, but here it comes again,” he said. Kim is among many owners of small- and medium-sized enterprises (SMEs) whose businesses are nearing the brink of collapse after the recent flare-up of COVID-19 infections.

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Korea Credit Data, a financial market services provider, said sales reported by SMEs in Seoul in the third week of August (Aug. 17 through Aug. 23) slumped 24.7 percent from a year earlier. This is a sharp drop from a 6.9 percent year-on-year fall a week earlier, and the steepest since the last week of February when it plunged 25.3 percent.

Separate data on over 650,000 SMEs nationwide showed their sales index standing at 0.85 in the third week of August, sliding from 0.93 the week before. This means the year-on-year drop of 0.15 in the third week was twice that of the 0.7 a week earlier, prior to the Aug.15 rally. A figure below one indicates year-on-year sales have decreased. Among the hardest-hit were those in Seoul. The index for Jongno and Jung districts near Gwanghwamun stood at 0.55 and 0.6, respectively. The figure was 0.83 for Gyeonggi Province.

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The hardship is expected to continue with other major economic activities nearly grounding to a halt due to the surge of new infections tightening consumption. Lotte World, an amusement park in Seoul, shut down Aug. 16 after reporting one infection there. The number of visitors had registered just 10 percent of the numbers a year earlier, according to the park operator.

The Korean Film Council, supervised by the Ministry of Culture, Sports and Tourism, said about 370,468 people went to the movies between Aug. 22 and Aug. 23, only 19.8 percent of the 1.87 million a year earlier. The noticeable fall in consumption activities will be borne out by figures from Statistics Korea whose July figures already indicated a sharp drop in spending in the private sector. The statistics agency data released Monday showed that retail sales sank 6 percent in July from a year earlier, the first drop in four months mostly because the effect of cash and cash-equivalent relief packages in May and June had worn off.

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Overall industrial output jumped 0.1 percent from a month earlier, driven by a 14.4 percent increase in auto exports. Consumption and investment reported drops of 0.6 percent and 2.2 percent, month-on-month. The new COVID-19 outbreak will lower Korea’s growth outlook to around a 3 percent contraction for 2020, far worse than the 1.3 percent contraction forecast by the Bank of Korea Aug. 27, according to Seoul National University economist Kim So-young.

“Lockdown-level social distancing will certainly erode consumption, above all, as well as investment. A steeper contraction of as great as 3 percent will be inevitable if the measures continue for weeks,” he said.

Source: The Korea Times

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