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Summer holiday season fails to help economy recover

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Rows of beach umbrellas provide shade on Gyeongpo Beach, a popular summer vacation spot, in Gangneung, Gangwon Province, July 30. Yonhap
Rows of beach umbrellas provide shade on Gyeongpo Beach, a popular summer vacation spot, in Gangneung, Gangwon Province, July 30. Yonhap

By Yi Whan-woo

Domestic travel is getting more expensive in Korea, prompting refrain from summer vacations here, thereby affecting the consumer spending crucial for economic recovery. The heat wave is also prompting people to stay home instead of going out to spend money.

According to Statistics Korea, Monday, the average price of renting a condo at a resort in the country went up by 13.4 percent in June from a year earlier.

During the same period, the average cost of staying in a hotel jumped 11.1 percent, while the price of a ticket at a theme park jumped 6.8 percent and eating out became 6.3 percent more expensive.

Such price hikes were comparable to the overall rate of inflation of 2.7 percent in June from the previous year, the least since September 2021.

Several restaurants, hotels and other businesses in the travel sector are offering lowered prices to attract consumers.

Yet, even so, many consumers can't afford to travel to the country's popular vacation destinations due to inflation's effect on travel costs.

As a consequence, some people are choosing to spend their summer holiday at home while others are opting to travel abroad as it is cheaper than here, depending on their destination. The heat wave is also hindering domestic travel, with the government recommending people refrain from outdoor activities.

A study conducted by Eduwill, an information provider on licenses for a range of professions, showed early this month that 30.5 percent of the 118 respondents ― in their 20s to 40s ― said they would stay at home during their summer vacation. Another 38.1 percent said they will go on holiday later this year.

Some more findings this month, in a separate study carried out by the online survey company PMI, showed that only 27.4 percent of the 3,000 adults surveyed said that they will go on a summer vacation.

The rate is lower now than the 42.2 percent registered in 2021 when tough social distancing rules were taking effect due to the COVID-19 pandemic.

"You can see how much people are discouraged by the high price of domestic travel," PMI said.

An economist said that under the current circumstances, travel inflation during the summer holiday season has had an impact on private spending, which has been one of the twin growth engines, along with exports, for Korea's trade-reliant economy.

In the first quarter of the year, private spending was the biggest contributor to gross domestic product (GDP), as it accounted for 0.3 percentage points of growth and offset the adverse effects of net exports, which pulled down growth by 0.1 percentage points.

In the second quarter, private spending fell 0.1 percent from the previous quarter as spending on services declined, while spending on goods remained plateaued to the previous quarter's level.

"The summer holiday season possibly decides the trend of consumer expenditure in the third quarter, and the fact that many people tend to not travel may hamper the growth of such expenditure and also the quarterly GDP," said Lee Sang-ho, head of the Korea Economic Research Institute's (KERI) economic policy team.

Yi Whan-woo


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