Stuck-home South Koreans could prop up economy for third of the price

South Korean tourists unable to enjoy an overseas summer getaway this year could help plug a hole in domestic spending by dropping some of their holiday cash at home.

If the tens of millions of would-be travelers spend only about a third of their typical overseas holiday budget in country, that could cover the loss in overall private consumption caused by the pandemic, according to a calculation by Bloomberg Economics.

That outcome would be good news for policymakers looking to encourage more domestic travel to support the economy, though the potential benefits need to be weighed against the increased risk of spreading the virus.

Since South Korea isn’t high on the list of global vacation destinations, there are many more Koreans traveling abroad than foreign visitors in a normal year, which means a lot of money leaving the country. In 2019, its 28.7 million Korean travelers spent 41 trillion won ($34.5 billion) abroad, balance of payments data shows.

Bloomberg Economics’ Justin Jimenez sees potential for some of that money to fuel a recovery in private consumption as people who’ve been cooped up at home during the pandemic splash out on vacations in South Korea. He calculates the drop in domestic consumption at 14 trillion won in the first quarter.

South Korea isn’t alone in hoping domestic tourism or a redirecting of overseas holiday spending will help fill the vacuum left by a lack of visitors. The tourism-challenged governments of Japan and Singapore have also launched campaigns to spur domestic travel this summer.

The risk, of course, is that more movement could spread the virus, a concern that prompted Japan to scale back its domestic travel subsidy program by excluding residents from Tokyo, where infections have been rising. The experiences of Hong Kong and Australia also show that small lapses in virus containment can lead to a quick escalation in cases.

Korea’s domestic tourism push may succeed better than others because its progress in containing the virus has made people feel safe to travel. Even without full lockdowns, an aggressive testing-and-tracking program has reduced the daily number of new cases to just dozens nationwide.

A recent survey by the Korea Transport Institute showed 37.8 percent of respondents plan to take a summer vacation, just 3.6 points less than last year. Among them, 98 percent said they would travel domestically, up from 78.3 percent.