Sewol casts shadow over S. Korea economy
August 28, 2014, 12:26 am TWN
SEOUL--South Korea's Sewol ferry disaster in April is still casting a cloud over the economy, with the effect on consumer spending lasting longer than expected, the central bank said Wednesday.
More than 300 people died when the Sewol ferry sank on April 16, most of them students from the same high school.
The tragedy plunged the country into deep mourning. Growth in the second quarter was the slowest for more than a year, partly because of sluggish personal spending.
The Bank of Korea said consumer sentiment was still struggling to recover.
“The fallout from the disaster turned out to be longer-lasting than expected, even though its impact has been easing,” it said of Asia's fourth largest economy.
The recovery in consumer sentiment remains feeble and companies are delaying investment due to uncertainty over the economic outlook, the bank said in a report entitled the “Golden Book.”
The report was based on a survey of more than 800 companies between late July and mid-August.
Out of the total, 154 companies involved in consumer services were polled separately on their concerns about the impact of the ferry sinking.
Just over half forecast that the disaster would depress their sales into September.
Some 30 percent expected the impact to continue until November, while about 20 percent said it would linger until year-end.
Gross domestic product rose a seasonally adjusted 0.6 percent in April-June from the previous quarter.
Citing sluggish domestic demand in the wake of the sinking, the finance ministry last month cut its growth forecast for this year to 3.7 from 4.1 percent.
The government unveiled a US$40 billion stimulus package last month as Finance Minister Choi Kyong-Hwan warned of the risk of recession.
The package worth around 41 trillion won is made up of 11.7 trillion won in expanded spending and 29 trillion won in extra financing support.
The lion's share will be spent this year, with 3 trillion won earmarked for the beginning of 2015.
A political dispute has broken out over plans for an independent inquiry into the tragedy.
More than 130 lawmakers from the main opposition New Politics Alliance for Democracy on Wednesday staged a sit-in for a second day at the National Assembly, paralyzing all parliamentary business.
They are protesting about the ruling Saenuri Party's refusal to set up a consultative body which would give victims' families a role in discussing legislation needed to set up an inquiry.