The economic fallout from the sinking of the ferry Sewol seems more serious and far-reaching than was initially thought

Updated : 2014-05-11 16:04

Fallout from disaster

The economic fallout from the sinking of the ferry Sewol seems more serious and far-reaching than was initially thought.
According to a report submitted by the finance ministry to a meeting chaired by President Park Geun-hye Friday, sales at department stores dropped 1.9 percent in April. At large discount stores, the performance was even worse with sales dipping 9.8 percent.
The impact of the unprecedented catastrophe that took place on April 16 is even more certain, considering that sales at department stores declined 0.2 percent in the fourth week of April after rising 4.5 percent in the first week.
Public cultural and leisure activities also weakened significantly. During the fourth week of April, the number of theatergoers fell 29 percent from a year ago, and that of amusement park visitors was down a whopping 68 percent.
So the government’s package of preemptive measures to address the problem of shrinking consumption following the tragic incident is timely and appropriate.
Specifically, the government will add 7.8 trillion won to its expenditure in the second quarter, bringing the percentage of government budget spending for the first half to 57 percent, up from a prior projection of 55 percent.
About 75 billion won in soft loans will also be offered to small businesses engaged in tourism, transportation and lodging, and public institutions will be encouraged to frontload their budget spending and investment plans.
Strategy and Finance Minister Hyun Oh-seok was right to say that the measures were needed to prevent the maritime disaster from putting out the embers of the current economic recovery. And the relatively weak intensity of the package is understandable, given the difficulty to gauge the impact of the ferry calamity on the economy at the moment.
But it will be necessary for the government to come up with stronger revitalization measures after monitoring economic activities more closely, given a caution by Bank of Korea Governor Lee Ju-yeol that the Sewol tragedy may continue to depress consumer spending until the end of June.
That’s because the psychological impact on the public from the ferry sinking is greater than ever before, especially because of the fact that most of the victims were high school students.
What’s needed now is for the government to encourage people to return to normal consumption although it’s necessary to keep in mind the painful lessons from the calamity and redress all evil practices entrenched in society.
It’s none other than the working-class people who will be hit hardest by the protracted economic downturn.