Domestic spending rebounds as policy efforts take hold

Korea Herald

2 days ago

The South Korean government said efforts to revive domestic demand may be taking hold, with credit card spending posting a sharp rise in July.
In its latest monthly economic assessment, the Green Book, the Ministry of Economy and Finance highlighted signs of recovery as policy measures begin to take effect, helping offset persistent risks that have pressured growth.
'Recently, our economy has continued to face concerns over delayed recovery in construction investment, hiring difficulties in vulnerable sectors and potential export slowdowns from US tariffs,' the report said.
'But there are also positive signs for future recovery, such as consumer spending turning upward on the back of policy effects.'
Preliminary data showed domestic credit card spending climbed 6.3 percent in July from a year earlier, the fastest growth since February's 6.8 percent gain.
The ministry interpreted the rebound as a sign of a broader revival in private consumption, building on last month's improvement in consumer sentiment. In July, the Green Book had flagged sentiment gains as a positive signal, marking a shift from the caution it maintained earlier in the year amid political uncertainty following December's martial law declaration.
That brighter backdrop was reflected in headline growth figures. Korea's economy rebounded in the second quarter, expanding 0.6 percent as both domestic demand and net exports recovered, snapping back from a 0.2 percent contraction in the first quarter.
To give an impetus to demand, the government has rolled out two supplementary budgets this year aimed at boosting consumption and supporting struggling industries.
The second, approved last month, allocated over 13 trillion won ($9.4 billion) for 'livelihood recovery coupons' that will provide cash handouts to all South Koreans. The first batch of stimulus vouchers was distributed in July, with spending reflected in that month's data.
Other sectors also showed improvement. Chinese tourist arrivals in July jumped 36.2 percent from a year earlier, the first time growth has exceeded 30 percent since January. The Composite Consumer Sentiment Index rose for a fourth month to 110.8 in July, up 2.1 points from June. A reading above 100 indicates more optimism than pessimism.
Still, domestic car sales growth slowed to 2 percent in July from 8 percent in June.
'The government will swiftly implement the supplementary budget and focus all resources on ensuring that the stimulus coupons serve as a catalyst for boosting domestic demand, including consumption and regional economies,' the ministry said, adding it will also commit to guarding against trade risks and supporting companies affected by US tariffs.