BOK chief worried by weak consumption

By Korea Herald
  • Published : May 21, 2014 - 20:43
  • Updated : May 21, 2014 - 20:43
The head of South Korea’s central bank on Wednesday expressed his concerns over signs of waning domestic demand over the past month in the wake of the ferry accident on April 16.

“The (Sewol) ferry disaster is taking a toll on the service sector and self-employed and small-business owners in particular, along with the recent appreciation of the Korean won,” Lee Ju-yeol, the Bank of Korea governor, said in a meeting with experts on economic trends in Seoul.

Consumer sentiment continued to dwindle in the aftermath of the sinking of the 6,825-ton ferry Sewol off South Korea’s southwestern coast that left over 300 people dead or missing. 
Deputy Prime Minister and Finance Minister Hyun Oh-seok (right) makes an opening address at a National Assembly hearing regarding financial assistance to public sector businesses affected by the ferry disaster in Seoul, Wednesday. (Lee Gil-dong/The Korea Herald)

The downtrend has triggered concerns about the country’s economy. The government is now looking to spend an additional 7.8 trillion won ($7.7 billion) during the first half the year as part of efforts to prop up domestic demand.

The government expects the additional spending will result in a 0.2 percent hike in the country’s gross domestic product during the second quarter of this year compared with three months earlier.

Meanwhile the government and the ruling party agreed Wednesday to provide financial assistance to a wider range of businesses affected by shrinking domestic consumption in the wake of the ferry disaster.

Officials said low-interest financial support would go to restaurants, wholesale and retail businesses, and other small companies.

Festivals, concerts and other public gatherings have been canceled in the aftermath of the incident due to nationwide mourning, and consumer sentiment has also weakened sharply, with retailers, transportation and tourism industries being hit hardest by the fall in spending.

Policymakers and members of the ruling Saenuri Party agreed at a meeting in Seoul on Wednesday to tap into 50 billion won in funds to support the performing arts and the art community, cited as one of major industries deeply hurt by the falling consumer demand.

The support is in addition to a previous government announcement last week to help struggling businesses, with measures largely focused on the tourism, transportation and hospitality industries.

They also agreed to give special operational funds to small restaurants in Ansan, Gyeonggi Province, and on Jindo Island, South Jeolla Province, which were designated special disaster zones, through state-run lenders.

By Oh Kyu-wook and news reports