Sewol effect felt in economy, too

The sinking of the Sewol has apparently dealt a blow to the country’s recovering economy as private consumption has contracted even more in the wake of the tragedy.

Government officials also worry about the impact of the accident on the macroeconomy that showed improvement in the first quarter of the year.

At a ministerial meeting on economic affairs held in Sejong yesterday, Deputy Prime Minister Hyun Oh-seok emphasized that the government will closely monitor the accident’s consequences on the economic front.

“There is a need to keep a close eye on the impact of the accident on the economy,” the minister said. “So far, the impact has been limited, but there are signs that private consumption has been hit quite a bit as retail sales, visits to cultural facilities and tourism events have slowed.”

The minister said the government will come up with pre-emptive measures to keep the economy from losing steam.

Tomorrow morning, President Park Geun-hye will preside over an emergency meeting on the economy that will focus on private consumption.

The Ministry of Strategy and Finance is working on a separate consumption index that shows decreased sales after the accident. Reportedly, the ministry estimates that sales at department stores and large retailers grew at a lower rate in April than March, especially after the ferry capsized April 16.

If the consumption index turns out to be low, it is likely the impact of the accident would be greater than the government estimated and could even even affect GDP. The government target for GDP growth is 3.9 percent for this year.

In the first quarter, GDP expanded 3.9 percent year-on-year, largely owing to continuing expansion of exports and a significant increase in construction investment.

Private consumption grew a mere 0.3 percent, halved from the fourth quarter of 2013. Considering the drop in retail sales last month, the index is expected to turn sour.

The retail industry has felt the most immediate impact. The nation’s largest discount store chain E-Mart said its April sales dropped 3.5 percent year-on-year. Lotte Mart saw a 4.5 percent drop, and Home Plus was down 3.4 percent, the companies said.

The tourism industry has been hit directly, too.

According to the Seoul Association of Chartered Bus Transportation Business, almost all reservations of chartered buses for school trips since April 16 have been canceled. The association reported about 1,000 rescissions of contracts from 434 schools as of yesterday.

Housing transactions in Seoul also contracted about 11 percent last month compared to March.

According to the Seoul City Government yesterday, apartment sales rose from 5,545 in January to 9,484 in March. But in April, the figure fell to 8,466. The fall indicates about 50 billion won ($48.8 million) has disappeared from the housing market.

“Due to the sorrowful national mood, there have been fewer people who are willing to purchase a house aggressively by spending a lump-sum of money,” said a realtor surnamed Choi in central Seoul.

BY SONG SU-HYUN [ssh@joongang.co.kr]