By Bae Eun-joo
Many people found an oasis in the desert when the Korean government started paying out coronavirus emergency funding in May. Ranging from 400,000 won to 1 million won, depending on the number of household members, all Korean citizens were eligible to receive the relief money.
Totaling 14.3 trillion won, the emergency disaster fund was just what the doctor ordered since many people were struggling to cope with the economic impact of the COVID-19 outbreak, considering last month's unemployment benefits paid by the Ministry of Employment and Labor reached 1 trillion won for the first time.
The applications for relief cash were processed on a five-day rotation system based on the last digit of the applicant's birth year, the same plan that was used to purchase government-issued face masks at drug stores, to avoid overloading the online application system.
Thinking that the idea was a smart move, I rushed to take out my accredited certificate to access my credit card online, reminding myself that the given money should be spent by Aug. 31. Otherwise it would be deemed as a donation and automatically be sent to state coffers. Once I logged into my account, a pop-up window directed me to follow instructions. The application process started with a series of agreements on policy terms and lastly I was asked to indicate the amount of money I was willing to donate from the total.
After simply completing the application, I decided to try out my registered credit card at a nearby grocery store in my neighborhood. As soon as I swiped my plastic at the cashier, a text message appeared on my cellphone that indicated the amount of money spent and how much was still left from the aggregate.
Looking around the store, I noticed unusually long queues of visitors lined up in front of the counters ― quite a different scene from a couple of weeks before when the same place was almost empty as the COVID-19 crisis reached its peak since its outbreak last December.
A recent government report shows that a large sum of the coronavirus emergency fund was spent on grocery shopping (24.2 percent), which landed on the second spot of the relief money expenditure listing released last month. Eating out at restaurants topped the list with 24.8 percent. In third place came hospitals and drugstores with 10.4 percent, followed by gas stations with 5.4 percent. Clothing shops (5.3 percent), convenience stores (4.6 percent), private education (3.6 percent), gyms or beauty parlors (3.2 percent) and leisure (2.9 percent) were among the sectors people decided to spend their free money on.
The Ministry of the Interior and Safety announced last month that 64 percent of the credit/debit card-charged disaster fund, which adds up to over 6.1 trillion won, was consumed within the first three weeks of disbursement. How fast people were spending their direct payments indicated that people were using their relief checks to keep a roof over their head or food on the table, experts said. In fact, it only took me less than four weeks to use up all of my emergency money.
The situation seems not much different in the U.S. as research showed that people spent most of their $1,200 relief checks from the federal government on rent, credit card payments, mortgages and food. The $1,200 payments were largely gone in a week or two as people were really anxious to get the money and started spending it as soon as it got into their bank account. One major dissimilarity from Korea, however, is that beneficiaries can choose where they were willing to donate their disaster money, not compulsorily send it back to the government.
The government payout of the coronavirus relief fund apparently succeeded in propping up the economy immediately. The Credit Finance Association of Korea reported that credit/debit card spending in May recorded 78.1 trillion won, a 6.8 percent jump from the same month of last year. A whopping 17.5 percent increase in credit card spending was noticeable in large marketplaces, department stores and small grocery stores.
Experts warn this form of economic stimulus generating government debt is extremely likely to do more harm than good to the economy in the long term. Consumers are highly likely to save their relief checks instead of paying additional money out of their own pockets, which will not help boost the economy, they say.
The International Monetary Fund projected last week that Korea's economy will shrink 2.1 percent this year ― a bigger contraction from its minus 1.2 percent forecast in April ― as it also slashed its global growth forecast for 2020 due to the COVID-19 pandemic. As the South Korean government used up its relief check wildcard, it needs to come up with further solutions to cope with the apparently undying virus crisis.
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Totaling 14.3 trillion won, the emergency disaster fund was just what the doctor ordered since many people were struggling to cope with the economic impact of the COVID-19 outbreak, considering last month's unemployment benefits paid by the Ministry of Employment and Labor reached 1 trillion won for the first time.
The applications for relief cash were processed on a five-day rotation system based on the last digit of the applicant's birth year, the same plan that was used to purchase government-issued face masks at drug stores, to avoid overloading the online application system.
Thinking that the idea was a smart move, I rushed to take out my accredited certificate to access my credit card online, reminding myself that the given money should be spent by Aug. 31. Otherwise it would be deemed as a donation and automatically be sent to state coffers. Once I logged into my account, a pop-up window directed me to follow instructions. The application process started with a series of agreements on policy terms and lastly I was asked to indicate the amount of money I was willing to donate from the total.
After simply completing the application, I decided to try out my registered credit card at a nearby grocery store in my neighborhood. As soon as I swiped my plastic at the cashier, a text message appeared on my cellphone that indicated the amount of money spent and how much was still left from the aggregate.
Looking around the store, I noticed unusually long queues of visitors lined up in front of the counters ― quite a different scene from a couple of weeks before when the same place was almost empty as the COVID-19 crisis reached its peak since its outbreak last December.
A recent government report shows that a large sum of the coronavirus emergency fund was spent on grocery shopping (24.2 percent), which landed on the second spot of the relief money expenditure listing released last month. Eating out at restaurants topped the list with 24.8 percent. In third place came hospitals and drugstores with 10.4 percent, followed by gas stations with 5.4 percent. Clothing shops (5.3 percent), convenience stores (4.6 percent), private education (3.6 percent), gyms or beauty parlors (3.2 percent) and leisure (2.9 percent) were among the sectors people decided to spend their free money on.
The Ministry of the Interior and Safety announced last month that 64 percent of the credit/debit card-charged disaster fund, which adds up to over 6.1 trillion won, was consumed within the first three weeks of disbursement. How fast people were spending their direct payments indicated that people were using their relief checks to keep a roof over their head or food on the table, experts said. In fact, it only took me less than four weeks to use up all of my emergency money.
The situation seems not much different in the U.S. as research showed that people spent most of their $1,200 relief checks from the federal government on rent, credit card payments, mortgages and food. The $1,200 payments were largely gone in a week or two as people were really anxious to get the money and started spending it as soon as it got into their bank account. One major dissimilarity from Korea, however, is that beneficiaries can choose where they were willing to donate their disaster money, not compulsorily send it back to the government.
The government payout of the coronavirus relief fund apparently succeeded in propping up the economy immediately. The Credit Finance Association of Korea reported that credit/debit card spending in May recorded 78.1 trillion won, a 6.8 percent jump from the same month of last year. A whopping 17.5 percent increase in credit card spending was noticeable in large marketplaces, department stores and small grocery stores.
Experts warn this form of economic stimulus generating government debt is extremely likely to do more harm than good to the economy in the long term. Consumers are highly likely to save their relief checks instead of paying additional money out of their own pockets, which will not help boost the economy, they say.
The International Monetary Fund projected last week that Korea's economy will shrink 2.1 percent this year ― a bigger contraction from its minus 1.2 percent forecast in April ― as it also slashed its global growth forecast for 2020 due to the COVID-19 pandemic. As the South Korean government used up its relief check wildcard, it needs to come up with further solutions to cope with the apparently undying virus crisis.
