With the approaching Lunar New Year, the 'temporary holiday' card has re-emerged. This comes about 100 days after National Armed Forces Day on Oct. 1 last year. The government claims it is introducing temporary holidays for 'domestic demand stimulation,' but contrary to this intention, there have been cases where consumption waned in months that included temporary holidays, leading to controversy. Past cases show that decreased consumption has translated into overseas travel expenditure. Experts' opinions on the consumption stimulation effect of temporary holidays also vary.
The government announced on the 9th that Deputy Prime Minister and Minister of Strategy and Finance Choi Sang-mok chaired a meeting on national agendas and economic relations to review designating 'January 27' as a temporary holiday. If the designation of the temporary holiday is confirmed, many workers could enjoy the holiday from January 25 until the last day of the Lunar New Year holiday on January 30, or by using vacation days until January 31, extending the break into the following month.
The government's reasons for promoting temporary holidays are 'domestic demand stimulation' and 'local tourism revitalization.' However, examining past indicators related to domestic demand following temporary holiday designations, it appears difficult to evaluate any actual effects. The most recent temporary holiday, which was on Oct. 1, 2023, shows that the retail sales figure, which indicates consumption, decreased by 0.4% compared to the previous month. Service industry production related to domestic demand, including wholesale and retail industries and accommodation and restaurant services, also fell by 1.4% and 1.9%, respectively.
It is not unreasonable to attribute the retail sales drop to the increase in consumption due to the Chuseok holiday in the preceding month of September. The retail sales index for October last year (seasonally adjusted) was 101.1, lower than the average retail sales index of 101.3 for the third quarter of 2024.
While domestic consumption decreased, overseas travel surged. According to the Ministry of Justice's immigration statistics, the number of citizens departing the country in October last year was 2.386 million. This figure surpassed that of the same month the previous year (2.047 million), as well as the figures for August (2.362 million) and September (2.315 million). Some travel agencies reported that their bookings for October exceeded those during the summer peak season in July and August.
Given the circumstances, some expected that instead of traveling abroad due to the shorter 'intermittent' holidays, people would spend more money domestically. However, examining the actual trend in overseas travel, it seems that temporary holidays have prompted international travel regardless of the continuity of the holiday. Particularly in October last year, departures to Japan, China, Taiwan, Hong Kong, and Thailand surged compared to the previous month. It appears that the demand for short-haul overseas travel increased.
Given this situation, self-employed individuals appear to have little expectation for the designation of temporary holidays. Jeon Mo, a 32-year-old self-employed person operating restaurants and cafes in Busan, noted, 'People are so busy traveling and going out that restaurants specializing in delivery seem to be hit hard. I have felt that just because there are holidays doesn’t mean business will thrive, so I'm not exactly thrilled about the news of the temporary holiday designation.'
Corporations have consistently voiced complaints every time temporary holidays are designated. This is because decreased operational days can negatively impact production and exports. In October last year, overall industrial production fell by 0.3% compared to the previous month, and in October of the year before last, when a temporary holiday was designated due to Chuseok (October 2), overall industrial production also decreased by 0.7%.
Research on the economic effects of temporary holiday designations is also somewhat scarce. The report titled 'Economic Ripple Effects of Temporary Holiday Designation,' published by the Hyundai Research Institute in July 2020, is mentioned each time. This report claims that the designation of one temporary holiday results in a production inducement of 4.2 trillion won for the entire economy and a value-added inducement of 1.63 trillion won. However, the premise cited in the report about 'per capita consumption expenditure and consumption composition ratio for one temporary holiday' is based on a survey conducted in 2011, leading to concerns about its current relevance, given a gap of over 10 years.
As a result, a significant number of economic experts predict that this year will not see substantial stimulation of domestic demand, similar to the recent two temporary holidays. Seok Byeong-hoon, a professor of economics at Ewha Womans University, stated, 'It is natural that the longer the holiday, the more people tend to go abroad.' He added, 'However, due to the high exchange rate (won-dollar exchange rate), travelers will likely prefer destinations with weaker currencies, such as Japan and Australia.' He mentioned that the government is pushing for temporary holidays because 'there are no suitable policies to stimulate domestic demand.'
On the other hand, there are voices hoping for the effect of temporary holidays. Cheon So-ra, a professor of economics at Inha University, remarked, 'Although various negative opinions may be raised regarding temporary holidays, there surely can be some positive effects.' She continued, 'During politically turbulent times like now, it would be nice to create an environment that reduces uncertainty and allows for more comfortable spending.' Professor Cheon stated, 'Temporary holidays may benefit some while being a loss for others, so it is essential to consider who this policy targets and to implement complementary policies moving forward.'