"The consumption of products such as toilet paper, beauty paper, and kitchen towels is shrinking, and I am worried. I can't see a way out."
An executive of a small to medium-sized enterprise manufacturing toilet paper said, "The fact that consumption of necessities like toilet paper is not good indicates that the economy is really struggling."
Company B, a medium-sized enterprise that actually manufactures toilet paper, noted, "Due to the economic recession and reduced consumption, sales of private brand products such as those from Coupang are increasing online, but sales of brands are indeed slightly decreasing."
Recently, signs of improvement in the economy are hardly visible, as production growth has slowed, particularly in the construction industry, which has led to a decline in consumer sentiment.
Additionally, the uncertainty in the economy caused by the emergency martial law declared in December last year is also influencing the situation.
According to the Korea Development Institute (KDI) in its recent report on 'January Economic Trends,' overall production in November last year showed a clear slowdown, decreasing by 0.3% compared to the same month the previous year. Among these, production in the construction sector continued to decline by 12.9%.
The business survey index (BSI) for manufacturing firms plummeted to 61 in January this year. The BSI measures corporations' judgments and forecasts regarding their management conditions. If negative responses exceed positive ones, the index appears below 100. Comparing it to July 2021 when the COVID-19 pandemic was at its peak (99), one can gauge how much the business sentiment index has worsened.
Household sentiment showed an even larger decline. According to KDI, the consumer sentiment index dropped to 88.4 points in December 2024, down 12.3 points from the previous month (100.7) as political instability due to martial law began. In particular, current economic assessments (70→52) and future economic outlooks (74→56) plummeted.
KDI analyzed that during the impeachment crisis of former President Park Geun-hye from 2016 to 2017, "the consumer sentiment index dropped by 9.4 points over three months, but recently, it has declined more significantly in just one month."
In the bustling restaurant districts near major workplaces in Seoul, where it was once difficult to find an empty seat or wait in line every evening, it is now common for establishments to take only a few tables or end business early.
The owner of a pub in Gangseo District, Seoul, which mainly serves second guests, lamented, "It's a great location, but there are no customers," adding, "No one comes in after 9 p.m." D, who runs a Korean restaurant in Yeongdeungpo District, stated, "Most days, I only have two or three tables during lunchtime, which means I lose money for the day."
This situation, where expenses such as rent, labor costs, and materials and supplies are continually rising, is why self-employed individuals are facing the crossroads of closure. According to data on individual business owners received from the National Tax Service by South Korea's ruling Democratic Party's lawmaker Ahn Do-geol, about 1.147 million individual businesses opened in 2023, while 910,000 (79.4%) closed their doors. This means that for every 10 self-employed individuals who start a business, 8 end up closing. This is the highest level in 10 years since the figure of 86.9% recorded in 2013.
Analysts argue that the combination of worsening employment for core consumer groups and rapid aging due to transitioning into a super-aged society is structurally influencing this domestic slump.
Researcher Lee Jong-kyu from the National Institute for Future Studies noted, "As jobs for the young and middle-aged are decreasing, consumption is being suppressed," adding, "The enforcement of the 52-hour workweek, coupled with a focus on work-life balance, is causing a decline in work-centered gatherings and increasingly anchoring minor consumption around home life."
The continuous rise in fixed expenditures, including housing expenses and education costs along with interest on loans, is also cited as a factor causing consumers to tighten their wallets.
According to the global economic data company CEIC, as of September 2024, the share of private consumption in South Korea's gross domestic product (GDP) was 48.5%, lower than that of the United States (67.7%) and Japan (55.1%).
GDP is spent on total consumption (private consumption + government consumption) to enhance current utility and total investment (domestic investment + foreign investment) to generate future income. A small share of private consumption compared to GDP indicates a lack of vitality in the domestic market, which is one of the main engines of economic growth.
The International Monetary Fund (IMF) has projected South Korea's GDP growth rate at 2% this year. It noted that while semiconductor exports will be a major driver of economic growth, the continued weakness in domestic demand will remain a burden.
KDI researcher Kim Jun-hyung stated, "Since income is the source of private consumption, there is a need to enhance the dynamism of our economy through productivity improvements."