🚨 Chuseok Holiday Spending Expected to Boost Domestic Economy
Today Korean Economic News for Beginners | 2025.10.05
0️⃣ Government Provides Consumer Coupons and Increases Holiday Goods Supply
📌 Golden Holiday Prompts Government All-Out Effort…Pursuing 'Two Goals' of Price Stability and Consumption Boost
💬 As this year's Chuseok holiday extends into a nearly week-long golden holiday, attention is focused on whether it can become a turning point for domestic economic recovery. Despite high interest rates and inflation, the consumer sentiment index has improved for five consecutive months, and the government has launched full-scale efforts to activate the domestic economy around this holiday. The government is making all-out efforts to boost consumption by expanding the supply of holiday goods such as apples, pears, and beef to 2-5 times normal levels and distributing second-round consumer recovery coupons (100,000 won per person). Various support measures are also being rolled out, including discount sales of regional love gift certificates, expansion of traditional market Onnuri gift certificates, and delivery app discount coupons. With increased travel and dining demand during the long holiday, expectations for local business district revitalization are growing, making it crucial whether this can breathe life into the stagnant domestic economy.
1️⃣ Easy Explanation
This year's Chuseok includes a nearly week-long 'golden holiday' with National Foundation Day and Hangeul Day. With this long vacation, people are more likely to open their wallets, and the government is pouring out various support measures not to miss this opportunity.
First, let me explain what holiday spending boom means. During major holidays like Chuseok or Lunar New Year, people spend much more money than usual. Spending increases significantly for transportation to visit hometowns, gifts for family and relatives, food ingredients for ancestral rites, and holiday meal preparation. Additionally, extra spending occurs from traveling or dining out during the long holiday.
This year is especially significant because the Chuseok holiday overlaps with National Foundation Day (October 3rd) and Hangeul Day (October 9th), creating a golden holiday of up to 10 days. Such a long vacation further increases consumption. People can plan trips to distant places they could only visit on weekends, or enjoy shopping leisurely.
The government is particularly focused on this holiday because the domestic economy has not been doing well recently. High interest rates and rising prices had kept people's wallets tightly closed. However, the consumer sentiment index has been improving for five consecutive months, showing that consumption willingness is gradually reviving.
The government is pursuing two goals simultaneously. First is holiday price stability. Holiday goods like apples, pears, and beef typically see large price increases during holidays, but this time the government is trying to prevent price spikes by significantly increasing supply. Apple supply was expanded to 5 times normal levels, pears to 2.4 times, and beef to 1.5 times. Large retailers and traditional markets are also conducting discount events with government support.
Second is consumption stimulation. While controlling prices, they're also encouraging people to spend more money. The most prominent example is the second-round consumer recovery coupons. These coupons, worth 100,000 won per person, can only be used at traditional markets, local supermarkets, and restaurants, making them likely to lead to direct consumption.
Regional love gift certificates are also being sold at discounts. For example, pay 100,000 won and receive a gift certificate worth 110,000 won. These gift certificates can only be used at stores in that region, helping to activate the local economy. Onnuri gift certificates for traditional markets have also been increased, and delivery apps are providing discount coupons.
For these policies to be effective, people actually need to increase consumption. This means spending on travel, dining out, or buying gifts during the long holiday needs to happen actively. The recent improvement in consumer sentiment is a positive signal.
However, there are concerns too. In a situation where interest rates are still high and price burdens are large, holiday spending might just be a temporary flash. People might close their wallets again after the holiday ends. There's also criticism that relying too much on government support could only increase fiscal burdens.
Ultimately, whether this Chuseok holiday becomes a real turning point for domestic economic recovery, or remains a temporary phenomenon, will have to be determined by observing consumption patterns after the holiday.
2️⃣ Economic Terms
📕 Consumer Sentiment Index (CCSI)
The Consumer Sentiment Index is an indicator that numerically represents how consumers feel about current economic conditions and future prospects.
- The Bank of Korea surveys 2,500 households monthly and announces the results.
- If higher than the baseline value of 100, it means economic optimism prevails; if lower, pessimism prevails.
- When this index rises, people are more likely to increase consumption, interpreted as a signal of economic recovery.
📕 Domestic Demand Stimulation
Domestic demand stimulation refers to policies or economic phenomena aimed at activating domestic consumption and investment.
- It's a strategy to support the economy through domestic demand when exports decrease or overseas economies worsen.
- Typical domestic demand stimulation policies include consumer coupon distribution, tax reductions, and public investment expansion.
- When domestic demand revives, domestic companies' sales increase and jobs are maintained, stabilizing the economy.
📕 Expansionary Fiscal Policy
Expansionary fiscal policy is when the government increases spending and reduces taxes to stimulate the economy.
- The goal is to actively inject money to increase total demand when the economy is bad.
- This includes consumer coupon distribution, public project expansion, and welfare spending increases.
- While it has short-term economic stimulus effects, excessive use can increase fiscal deficits and national debt.
📕 Holiday Season Goods
Holiday season goods are products that see sudden demand increases during major holidays like Chuseok or Lunar New Year.
- Typical examples include food ingredients for ancestral rites like apples, pears, Korean beef, mackerel, and eggs.
- As holidays approach, demand surges and prices tend to rise significantly.
- The government aims for price stability by releasing stockpiled goods or increasing imports to expand supply.
3️⃣ Principles and Economic Outlook
✅ Relationship Between Holiday Spending and Economic Cycles
Let's examine how holiday spending booms affect the economy and how they work.
First, holiday spending brings short-term increases in total demand. During holidays, many households spend 2-3 times more money than usual. Spending increases across various areas, from gift fruits, Korean beef, and health foods to transportation costs, dining expenses, and travel costs. When consumption increases, companies' sales rise, and increased sales stimulate corporate production activities. When production increases, employment is maintained or grows, and when employment is stable, people's income is guaranteed, leading back to consumption in a virtuous cycle.
Second, holiday booms particularly impact regional economies. During Chuseok, many people visit their hometowns, temporarily surging consumption in provincial cities. Highway rest stops, regional traditional markets, local supermarkets, and restaurants achieve large sales. This effect grows even larger when the government expands issuance of regional love gift certificates and Onnuri gift certificates. When local business districts revive, small business owners' income improves, leading to vitality throughout the regional economy.
Third, long holidays lead to increased service industry sales. A nearly week-long golden holiday greatly increases service consumption like travel, leisure, and dining out. Hotels, resorts, airlines, and car rental companies earn a significant portion of their annual sales during holiday periods. Restaurants and cafes also welcome 2-3 times more customers than usual. Since the service industry has a high employment ratio, activation in this sector has positive effects on job maintenance and creation.
Holiday spending is not just increased spending, but an important trigger that activates the economic cycle of consumption-production-employment-income.
✅ Government's Price Stability and Consumption Stimulation Policies
Let's analyze the content and effects of the government's 'two goals' policy.
First, price stability policy through supply expansion. While holiday goods prices typically surge during holidays, this year stockpiled goods were released early and imports increased to greatly expand supply. Apples were supplied at 5 times normal levels, pears at 2.4 times, and beef at 1.5 times to flood the market. According to basic economic principles, when supply increases, even if demand stays the same, prices fall or at least prevent surges. In reality, apple prices are nearly 20% cheaper than last Chuseok, and pears are also maintained at about 15% lower levels.
Second, direct consumption stimulation through consumer coupons and gift certificates. The second-round consumer recovery coupons worth 100,000 won per person are restricted to use at traditional markets, local supermarkets, and small restaurants. This is designed so benefits go directly to local small business owners rather than large retailers or online shopping malls. Regional love gift certificates also have the effect of benefiting consumers through 10% discount sales while simultaneously activating regional economies. The government estimates these policies will induce about 2 trillion won in additional consumption.
Third, supporting retailer discount events. The government cooperated with large retailers, convenience stores, and delivery app companies to encourage special discount events during the holiday period. It's a strategy to enable consumption to increase while reducing price burdens. Especially delivery app discount coupons have the effect of promoting dining consumption, helping increase sales for small business owners. However, there are concerns that if such discount competition becomes excessive, profitability for retailers and small business owners could deteriorate.
Government policy pursues two approaches in parallel: raising real purchasing power through price stability while increasing consumption through direct support.
✅ Sustainability and Challenges of Domestic Demand Recovery
Let's examine whether this holiday boom can lead to real domestic demand recovery and what challenges exist.
First, sustained consumption recovery beyond temporary effects is needed. During holiday periods, consumption increases due to government support and special occasions, but the problem is after the holiday ends. With high interest rates and price burdens still remaining, whether people can keep opening their wallets is crucial. In the past, consumption temporarily increased during holidays or year-end seasons only to contract again. For real domestic demand recovery, consumers' real income must increase and anxiety about the future must decrease. This means fundamental improvements like employment stability, wage increases, and interest rate cuts must be supported.
Second, there are issues of fiscal policy efficiency and sustainability. The government distributing consumer coupons and selling gift certificates at discounts is ultimately fiscal spending. It's releasing money collected through taxes or borrowed. While there are short-term economic stimulus effects, if this method continues, fiscal soundness can deteriorate. Especially with welfare spending continuously increasing due to aging, if fiscal input for economic stimulus also increases, national debt can grow rapidly. Therefore, fiscal support should be short-term and selective, and in the long term, should transition to policies that build private economic self-sufficiency.
Third, structural causes of weak domestic demand must be resolved. The Korean economy has long grown centered on exports, with the domestic market relatively weak. High household debt, severe income inequality, and an excessively high proportion of small business owners are also structural factors weakening domestic demand. If only short-term stimulus measures are repeated without solving these problems, effects will inevitably be limited. Real domestic demand recovery is possible only when structural reforms like household debt burden reduction, income redistribution strengthening, and small business restructuring with reemployment support are carried out in parallel.
For holiday booms to lead to meaningful domestic demand recovery, structural improvements and income growth must occur together beyond short-term stimulus measures.
4️⃣ In Conclusion
This Chuseok holiday is an important opportunity to breathe life into the stagnant domestic economy. The government is pursuing two goals simultaneously - price stability and consumption stimulation - pouring out various policies, and the long golden holiday provides a favorable environment for increased consumption.
Government policy consists of two main pillars. One is price stability through supply expansion. Holiday goods supply like apples, pears, and beef has been greatly increased to prevent holiday price spikes. The other is direct consumption stimulation through consumer coupons and gift certificates. Various means are being used to encourage people to open their wallets, including second-round consumer recovery coupons, regional love gift certificates, Onnuri gift certificates, and delivery app discount coupons.
These policies will definitely have short-term effects. Consumption will increase during the holiday period, and especially traditional markets and local small business owners will experience sales increases. Also, service consumption like travel, dining out, and leisure is expected to become active, giving related industries breathing room.
However, there are many hurdles to overcome for real domestic demand recovery. First, consumption recovery must continue even after the holiday ends. If it ends as temporary flash consumption, it's meaningless. Second, fiscal policy sustainability must be considered. The method of continuously releasing fiscal spending to support consumption cannot be maintained long-term. Third, structural causes of weak domestic demand must be resolved. Problems like high household debt, income inequality, and excess small businesses must be fundamentally improved.
The fact that the consumer sentiment index has been improving for five consecutive months is a positive signal. It means people's economic perception is improving and consumption willingness is gradually reviving. If holiday consumption occurs actively this time and the experience is positive, consumer sentiment could improve even after the holiday.
However, consumers' burdens remain as high interest rates and inflation continue. Unless interest rates fall rapidly or prices stabilize significantly, consumption recovery may be limited. Global economic uncertainty and export sluggishness are also worrying factors.
Ultimately, this Chuseok holiday is a testing ground for domestic demand recovery possibilities. We must watch whether government policy support, the long holiday, and improving consumer sentiment can combine to create meaningful consumption increases. And for this to lead to sustainable domestic demand recovery rather than a temporary phenomenon, income growth and structural reforms must occur together beyond short-term stimulus measures.
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