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| A fruit store owner talks with customers in this file photo. Getty Images Bank |
By Lee Min-hyung
The outbreak of the COVID-19 pandemic resulted in a surge in household spending on food, with fewer people enjoying outdoor activities and eating out in 2020, according to Bank of Korea (BOK) data.
The bank said household expenditure on groceries and non-alcoholic beverages came to an aggregate 81.78 trillion won for the first three quarters combined last year, up 9.3 percent from the previous year.
This made the nation's Engel's coefficient, the proportion of spending on household food consumption, reach 12.8 percent from January to September. This is the highest figure in two decades since 2000.
Growing fears of the coronavirus pushed the figure to rise last year. With the government tightening social distancing restrictions throughout 2019, more people have opted to stay indoors and increased spending on making meals at home, the data showed.
A rising Engel's coefficient is widely considered as a decrease in household income levels, as people have a tendency to increase the portion of non-food expenditures for enjoying leisure activities or purchasing luxury goods when their income increases, and vice versa.
Economists said the increase in the figure last year is also related to the virus-induced earnings declines particularly in the lower-income groups.
"Those in the low-income bracket ― particularly the self-employed ― have been hit hard by the pandemic and their income took a nosedive last year, which is a key reason for the increasing Engel's coefficient," Kim Dae-jong, a professor of business administration at Sejong University, said.
With infections expanding at a rapid pace from November, chances are growing that people will continue to prefer home-cooked meals to dining out in 2021 as well.
"Most people are expected to receive vaccines sometime in the latter half of 2021 possibly around October, so overall consumption here should remain in the doldrums until then," the professor said.
Under Level 2.5 social distancing rules, restaurants are not allowed to open after 9 p.m. except for deliveries or takeout. The government has also banned groups of five or more people from gathering under the restrictive measure, which will keep dealing a blow to private consumption here.
Another core reason behind the growth of the Engel's coefficient is the spread of telecommuting here and abroad. Starting in March, when the virus started spreading in earnest here, a growing number of companies embraced remote working, with some major conglomerates executing a mandatory telecommuting policy on a rotational basis.
The virus panic has also brought about a drastic change in households' consumption patterns in food.
According to Statistics Korea, online shopping is on a steep rise. In November last year, consumers here spent more than 15 trillion won for online and mobile shopping, up 17.2 percent from a year ago.
What stood out was the portion of food services _ which refer to online food delivery transactions _ which took up more than 60.6 percent out of the total during the same period. On the other hand, people spent less on culture and leisure services whose transaction volume dropped by 65.8 percent in November from the previous year.
More and more people are also expected to increase their spending on ordering groceries at home, rather than visiting discount stores amid continued fears over a third and fourth wave of the virus.
Data from Market Kurly, one of the fastest-growing grocery delivery companies in Korea, showed that sales from the firm's 240 small- to medium-sized partners doubled in 2020, compared to the previous year, due to the boom in online food shopping amid the virus panic.
"The preference for online transactions will persist throughout 2021, and Korea's overall domestic consumption is expected to remain sluggish at least until the first half of the year," Kim said.
This will keep posing a challenge to the self-employed and those relying on face-to-face transactions, according to him.
"Those in the top 20 percent income bracket have earned more, while those in the lowest 20 percent group suffered more since the outbreak of the pandemic," he said. "This phenomenon will remain in place this year unless the virus shock comes to a complete end."
