Boost domestic demand to rev up the economy

More holidays can be helpful in stimulating domestic consumption during an economic slowdown.

The Chuseok break will be lengthened to six days for Koreans this year as Oct. 2 has been designated a provisional holiday in hopes of stimulating domestic consumption by helping the struggling tourism industry in Korea. Few would oppose the increased holidays. Of course, companies may have to worry about their shortened work hours at factory lines, but workers would be happy with more time off and services providers happy with bigger business opportunities.

Studies on the effect of temporary holidays are mixed. The Hyundai Research Institute estimated about 4.2 trillion won ($3.1 billion) worth effect from lengthened holidays in 2020. But in 2013, the Korea Enterprises Association claimed that an extra day-off to connect the weekend and legal holiday can cause an output loss of 28 trillion won and additional labor costs of 4.3 trillion, which caused a total loss of 32 trillion won that year.

More holidays can be helpful in stimulating domestic consumption during an economic slowdown. The government is doling out 600,000 discount coupons for lodging and exempting highway toll fees during the six-day holidays to spur travel and spending. The move also can help companies save production costs during tough times when their corporate investment fell 8.9 percent in July.

Inbound and outbound trips are also expected to rise sharply during the long holiday. News reports say flights are fully booked to popular destinations like Japan and Thailand. But the travel deficit will likely worsen to further deteriorate the current-account balance. Our travel deficit reached $5.8 billion in the first half, accounting for a half of the $11.9 billion red in the services account. Outbound Koreans totaled 9.93 million in the first half, more than doubling 4.43 million foreigners who visited Korea during the same period.

To draw desired effect, discount coupons for lodging and credit-card incentives need to be widened. At the same time, government authorities must continue with their efforts to enhance the competitiveness of our domestic tourism. The inflation rate increased to more than 3 percent in August. Many people complain that trips at home cost too much during holidays in particular.

Many travelers return from Jeju Island with memories of over-charging wherever they go. People involved in inbound tours, including to Jeju, must check the cost and quality so that their customers do not prefer overseas trips. Overall improvements in the standards of the services sector, including the tourism, medical, legal, and education sectors, are needed more than ever. The National Assembly must hasten the approval of the Service Industry Advancement Act. Nothing can change if we do not change ourselves.