🚨 Consumption Coupon Flash Effect Ends
Today Korean Economic News for Beginners | 2025.10.11
0️⃣ Export Slump & Domestic Demand Slowdown Double Blow, Economic Recovery Difficult Without Structural Improvement
📌 Flash Consumption Coupons, Uncertain Exports... Will the Economy Recover After the Holiday?
💬 The Korean economy is suffering from a double blow of export slump and domestic demand slowdown despite expectations for a second-half recovery. The consumption coupons the government distributed to boost domestic demand increased spending in the short term, but the effect disappeared within a month, resulting in only a "flash stimulus." After the coupon period ended, consumption shrank again, and self-employed business owners say "customers only increased temporarily, but it didn't lead to sustained sales growth." Moreover, with exports also struggling due to uncertainty in trade negotiations with the US and a global economic slowdown, experts point out that economic recovery is difficult with only short-term fiscal policies. As the self-employed business structure has fundamentally changed with the spread of online consumption and delivery services, voices are growing louder that new domestic demand strategies are needed.
1️⃣ Easy to Understand
The government distributed consumption coupons to revive the economy, but the effect quickly disappeared, making Korea's economic difficulties even clearer. Amid the double blow of poor exports and stagnant domestic demand, voices are growing louder for finding fundamental solutions.
First, let me explain what the consumption coupon policy is. The government distributed consumption coupons to citizens before this year's holiday season. They allowed people to use coupons worth 100,000 won per person at traditional markets or small business stores. The purpose was clear: to revive the self-employed sector and domestic economy that had been depressed after COVID-19.
Actually, there was an effect right after the coupons were distributed. Sales at traditional markets and small business stores increased noticeably. 20-30% more customers visited than usual, and sales went up accordingly. The government looked at this and praised itself, saying "the domestic demand stimulus policy is succeeding."
But the problem was sustainability. As soon as the coupon period ended, consumption returned to normal. In some cases, sales even dropped more after the coupons ended because people had made purchases in advance during the coupon period. Self-employed business owners lament that "business was good only for about a month, but fundamentally nothing changed."
Why did this happen? The key issue is that consumption coupons are a "one-time" policy. People spend when they have coupons, but close their wallets again when the coupons disappear. This is especially true in uncertain times like now. Prices keep rising, jobs are unstable, and the real estate market is stagnant, making it difficult for people to increase spending.
On top of this came export slump. The Korean economy has a structure highly dependent on exports. More than 40% of GDP comes from exports. But recently, exports have not been doing well. The biggest reason is uncertainty in trade relations with the US. With the Trump administration announcing various tariff policies, companies are hesitating to invest and export.
Global economic slowdown is also a problem. The Chinese economy is not growing as much as before, and Europe is also in a recession. As demand for Korea's main export items like semiconductors, automobiles, and chemical products decreases, export companies are struggling.
When exports are poor, corporate profits decrease, and this leads to reduced employment. When jobs decrease, people's income decreases, and eventually consumption also shrinks. This creates a vicious cycle where export slump spreads to domestic demand.
The bigger problem is that the self-employed business structure itself has changed. After COVID-19, as online shopping and delivery services spread rapidly, the position of traditional offline self-employed businesses has greatly weakened. Even when consumption coupons are given, people often order online or use large supermarkets.
For example, in the past people shopped at neighborhood stores, but now they order from Coupang or Market Kurly with dawn delivery. Instead of neighborhood restaurants, they order food through delivery apps. In this structural change, simply distributing coupons is not enough to save self-employed businesses.
Experts emphasize that we now need to improve the economic structure beyond short-term stimulus measures. They say we need to support the digital transformation of self-employed businesses, foster new types of small business models, and reduce external dependence through export diversification.
In the end, the prevailing assessment is that consumption coupons were just painkillers that relieved symptoms, not medicine that fundamentally cures the disease.
2️⃣ Economic Terms
📕 GDP Growth Rate
GDP growth rate is an indicator showing how much the total amount of goods and services produced in a country during a certain period has increased.
- It is the most representative figure showing how much the economy is growing.
- It is usually expressed as a percentage increase compared to the previous year or previous quarter.
- When GDP growth rate is high, the economy is active; when it is low or negative, it means economic recession.
📕 Marginal Propensity to Consume
Marginal propensity to consume is the ratio showing how much of an income increase is used for consumption.
- For example, if you spend 300,000 won when your income increases by 1 million won, the marginal propensity to consume is 0.3.
- The higher the marginal propensity to consume, the more income increase leads to consumption increase, resulting in greater economic stimulus effects.
- The effectiveness of policies like consumption coupons is greatly influenced by the marginal propensity to consume.
📕 Domestic Demand
Domestic demand means consumption and investment occurring in the domestic market, unlike exports.
- Household consumption spending, corporate facility investment, and government fiscal spending are all included in domestic demand.
- For the economy's basic strength to be solid and to have resilience against external shocks, domestic demand must be active.
- For countries with high export dependence like Korea, boosting domestic demand is an important challenge.
📕 Structural Change
Structural change means a phenomenon where the economic system or industrial structure fundamentally changes.
- Unlike temporary or cyclical changes, it is long-term and difficult to reverse.
- The spread of online shopping and delivery services is a typical example of structural change.
- Structural changes should be addressed with long-term strategies, not short-term policies.
3️⃣ Principles and Economic Outlook
✅ Limitations and Problems of Consumption Coupon Policy
Let's analyze why consumption coupons had only temporary effects and what the fundamental limitations of such policies are.
First, it was merely a "time shift" effect that only brought consumption forward. Rather than creating new consumption, consumption coupons had a large effect of bringing forward consumption that would have happened later. For example, buying in September what you would have bought in October. In such cases, consumption increases during the coupon period, but when the coupons end, consumption actually decreases, showing a "rebound effect." In fact, there were many reports that self-employed business owners' sales fell even more than before right after the coupons ended. In the end, the total amount of consumption didn't increase much—only the timing changed.
Second, it didn't lead to consumption instead of savings. For consumption coupon policies to be effective, people who receive coupons should increase consumption accordingly. But reality was different. Many people bought essential goods with coupons and used the saved money for savings or paying off debt. This is related to what economics calls "Ricardian equivalence." It's a theory that people tend to save money they receive rather than spend it, expecting the government will collect it later through taxes. This tendency becomes stronger especially when the future is uncertain.
Third, it didn't reflect the changes in self-employed business structure. Consumption coupons mainly targeted traditional markets and offline small businesses. But the center of consumption has already moved online. Especially younger generations prefer online shopping and delivery apps over traditional markets. If the places where coupons can be used are limited even when given, the effect is bound to be less. Also, online shopping malls and large platform companies were excluded from coupon benefits, so coupons couldn't be used where consumers actually use most, which was also a limitation.
Consumption coupons had short-term stimulus effects but revealed fundamental limitations due to lack of sustainability and failure to reflect structural changes.
✅ Ripple Effects of Export Slump on Domestic Demand
Let's examine specifically what impact reduced exports have on the entire domestic economy.
First, decreased corporate profits lead to employment contraction. Korea is an export-driven economy where exports account for more than 40% of GDP. When exports decrease, the sales and profits of export companies decrease. Not only large companies like Samsung Electronics, Hyundai Motor, and SK Hynix, but also small and medium-sized companies that supply parts and materials to them are hit. When corporate profits decrease, new hiring stops, and in severe cases, restructuring and layoffs occur. The decrease in manufacturing employment in the first half of this year was mainly due to export slump.
Second, income reduction connects to consumption contraction. When jobs decrease and wages stagnate, household income decreases. When income decreases, people reduce consumption and increase savings. This is especially true when there is great anxiety about future income. In fact, the consumer sentiment index has been declining in recent months, which reflects concerns about employment instability and income reduction. When consumption shrinks, self-employed businesses and service industries are also hit, depressing overall domestic demand.
Third, investment reduction weakens long-term growth momentum. When export prospects are dim, companies hesitate to invest in new factories or facilities. When investment decreases, future production capacity doesn't increase, lowering the economic growth rate in the long term. Also, investment reduction leads to decreased employment and sales in construction and related industries, creating another vicious cycle. The facility investment growth rate recorded negative this year due to export slump and global uncertainty.
Export slump is not just a problem for export companies but weakens the entire economy by causing chain reactions in employment, income, consumption, and investment.
✅ Self-Employed Business Structure Changes and New Challenges
Let's examine the accelerated self-employed business structure changes after COVID-19 and new policy directions to respond to them.
First, the boundary between online and offline is collapsing. In the past, it was common to buy things at neighborhood stores or eat at restaurants. But now ordering from online shopping malls and ordering food through delivery apps has become much more common. This tendency is especially strong among younger generations. The problem is that traditional offline self-employed business owners are not adapting to these changes. To enter online platforms, technology and capital are needed, but many small business owners are struggling with this.
Second, the burden of platform fees is worsening self-employed business owners' profitability. When you enter delivery apps or online platforms, you have to pay 10-30% of sales as fees. In self-employed businesses already operating on thin margins, such high fees are a big burden. Many self-employed business owners complain that "business doesn't work without delivery apps, but there's nothing left because of fees." The government is trying to regulate fees, but platform companies are resisting, saying "service quality will decline if fees are lowered," making it difficult to resolve.
Third, new forms of self-employed business models are needed. Simply sticking to old methods makes survival difficult. Successful self-employed business owners are creating hybrid models combining online and offline, targeting specialized niche markets, or actively using SNS marketing. The government should also support these changes. They should provide infrastructure such as digital education, online marketing support, and joint logistics system construction to help self-employed business owners adapt to new environments.
The crisis of self-employed businesses is not simply a result of economic cycles but of structural changes, so new business models and support policies are needed.
✅ Future Outlook and Necessary Policy Directions
Let me comprehensively present policy directions needed for the Korean economy to overcome current difficulties and get back on a growth track.
First, export diversification and new market development are urgent. We need to reduce export dependence on the US and China and actively develop emerging markets such as Southeast Asia, India, the Middle East, and Africa. Also, we need to increase service exports like K-content, medical services, and education, not just traditional manufacturing products. Recently, K-pop and K-dramas are popular worldwide, and strategies are needed to connect this to economic results. The government should expand financial support and deregulation for overseas market development.
Second, a structural approach to boosting domestic demand is needed. Rather than one-time policies like consumption coupons, policies that continuously increase household income and stabilize employment are important. Income should be increased through minimum wage increases, conversion of non-regular workers to regular workers, and youth job creation. It's also necessary to reduce fixed expenses like housing, education, and medical costs to increase households' disposable income. In the long term, the social safety net should be strengthened to reduce future anxiety and improve consumer sentiment.
Third, digital transformation and industry conversion of self-employed businesses should be actively supported. Rather than simply maintaining current self-employed business owners, we should help them transform into new forms. Infrastructure such as online sales education, digital marketing support, and joint logistics system construction should be provided. Also, in industries with excessive competition, industry conversion should be encouraged, and new startup items should be discovered. Unfair practices between franchise headquarters and franchisees should also be improved to increase self-employed business owners' profitability.
A balanced policy mix that combines short-term stimulus measures and long-term structural improvement is the key to economic recovery.
4️⃣ In Conclusion
The flash effect of consumption coupon policy did not solve the fundamental problems facing the Korean economy, and structural improvement is essential to overcome the double blow of export slump and domestic demand slowdown.
The government's consumption coupon policy helped self-employed business owners in the short term, but the effect disappeared within a month, clearly revealing the limitations of one-time stimulus measures. There was an effect of bringing consumption forward, but it didn't increase the total amount of consumption, and there was even a rebound effect where sales decreased even more after the coupons ended.
The bigger problem is that the Korean economy is suffering from the double blow of export slump and domestic demand stagnation. With trade uncertainty with the US and global economic slowdown, exports are struggling, and this leads to employment reduction and income stagnation, creating a vicious cycle that shrinks domestic demand. Given Korea's high export-dependent economic structure, export slump has serious ripple effects on the entire economy.
The self-employed business structure has also fundamentally changed. With the spread of online shopping and delivery services, the position of traditional offline self-employed businesses has weakened, and high platform fees are worsening profitability. In this structural change, simply distributing coupons cannot save self-employed businesses.
Three policy directions are needed for future economic recovery. First, export markets should be diversified and service exports expanded to reduce external dependence. Second, household income should be continuously increased and employment stabilized to strengthen the domestic demand base. Third, digital transformation of self-employed businesses should be supported and new business models fostered.
Short-term stimulus measures are also necessary, but more importantly, long-term strategies to improve economic constitution are needed. One-time policies only have temporary effects and cannot provide fundamental solutions. The government should implement comprehensive and sustainable policies focused on economic structure improvement.
In the end, consumption coupons were just painkillers given to the patient called the economy, not medicine to cure the disease. Now is the time to start fundamental treatment, not just painkillers.
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