Card spending logs nationwide fall after martial law declaration

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Card spending logs nationwide fall after martial law declaration

Published: 24 Dec. 2024, 06:00 Updated: 24 Dec. 2024, 12:48

CHO YONG-JUN
[email protected]

Audio report: written by reporters, read by AI

Myeong-dong in Jung District, central Seoul on Dec. 23 [NEWS1]

All Korean cities and provinces posted a double-digit drop in credit card spending on Dec. 6 — three days after the Dec. 3 martial law declaration — showing signs of further contraction in domestic demand after already deteriorating over the recent months.

On average, credit card spending plummeted by 26.3 percent nationwide on Dec. 6 compared to the previous week, according to Statistics Korea on Sunday, compiled through Shinhan Card’s data.

Credit card spending in Seoul was also heavily affected, dropping 29.3 percent compared to the previous week.

Gwangju, North Jeolla and South Jeolla were the three regions that had the most dramatic decrease in credit card spending at over 30 percent, with Gwangju suffering a 35.9 percent drop. Even Daegu — where the smallest drop occurred — saw its spending decrease by 19.6 percent.

While average spending fluctuates weekly and monthly due to many factors including individual spending patterns, payday, holidays, discount promotions, payment due dates and even weather, such a drastic decrease across all 19 regions and cities in December — when festive end-of-year spending is very much expected — marked a first since Statistics Korea began publishing credit card transaction data in 2020.

By category, spending in the entertainment, sport and culture sectors fell by 6.7 percent compared to the previous week, while the food and beverage category dropped by 6.5 percent.

Credit card transactions in stores nationwide, too, experienced a 27.4 percent tumble during the same period — proof that small businesses were hit hard by the chaos started by the emergency martial law declaration.

The tourism industry will likely take a hit from the political instability caused by President Yoon Suk Yeol: The United States, Britain and Canada issued travel advisories and urged caution for travelers and residents in Korea following the martial law declaration. While the advisories, along with the short-lived martial law, were soon lifted, the tourist sentiment may take longer to recover.

The government said it plans to light up the economy next year by allocating three-quarters of the yearly budget for the first half of 2025; it will also encourage end-of-year government events to help increase spending. The budget for government-issued loans for small enterprises has also been increased by 60 billion won ($41.3 million) to 3.77 trillion won.

The possibility of a supplementary budget allocation is also increasing, with Finance Minister and Deputy Prime Minster Choi Sang-mok pledging to “continue the review on appropriate countermeasures” as he looks into “external uncertainties and the livelihoods of the public” during his recent visit to the National Assembly. A supplementary budget allocation at the start of the year is not only difficult for the government to justify but is also subject to pressure from the rise in inflation.

“A more aggressive fiscal policy would be effective for a boost in domestic demand in the current situation,” said Kim Jung-sik, an honorary professor at Yonsei University’s Department of Economics. “Monetary policies like lowering the base rate may take a while to be effective.”

“Both parties in the National Assembly should prospectively discuss a supplementary budget allocation in the first half of next year, and the government, too, should look at the big picture instead of just focusing on tightening the budget,” the professor said.

“Without active efforts to boost the economy, the local economy might suffer until May or June of next year.”

BY IM SOUNG-BIN [[email protected]]