Getting over the traumaIt’s a trauma the country has lived through but is still trying to recover from. The witnessing of the tragic deaths of hundreds of young students in a man-made maritime calamity has taken toll on the equilibrium of not only our everyday lives but also of the economy. It has forced the president to convene an emergency meeting to examine the repercussions on the economy from the sinking of the Sewol ferry and come up with actions to contain the spread of the sag in domestic consumption. The government decided to expand the meeting and invited experts from the private sector to discuss a wider range of measures.
What the government is most worried about is consumer sentiment. The signals from revenues of large retail stores and the use of credit cards are ominous. From the sinking on April 16 to the end of last month, daily spending through seven major credit card companies dipped more than 5 percent from the same period in the previous month. During the first week of May, which included a long holiday weekend, revenue at department stores edged up slightly but not to the extent seen in the previous year. Trade in real estate properties, which was on the rise, actually plunged 11 percent in April from a month earlier. If this hiatus in spending is protracted, the fledgling recovery in domestic demand may lose steam.
The effect on the economy from disasters in the past was temporary. Consumption slowed in the aftermath, but recovered later and did not upset overall annual economic growth. It may be different this time because the country has never felt such an emotional response to a single incident. Our society has entered a kind of collective depression because the victims were mostly high school students who could have been saved with some quick and sensible actions from the adults. On the external front, the won has shot up nearly 4 percent in a month. The economy has been hit with an unexpected double whammy.
An economy can be greatly influenced by mass sentiments. It is human nature to share pain and grieve after heartbreaking losses by refraining from frivolous indulgences. But such mourning should not be so excessive as to disturb the overall social and economic activities. The government should silently lead the country out of grieving and encourage people to return to their normal lives. Travel agencies, tourism and the lodging sector have been most hurt by the capsizing of the ferry on its way to the resort island of Jeju, and they need special attention from the government such as a grace period on tax payments. The government also could consider accelerating the spending it was planning for the second half. Most of all, the government should not stall in its reforms and deregulation plans.
JoongAng Ilbo, May 9, Page 30