The consumer coupons distributed last year created new spending equivalent to only 20% of their value, an analysis found. In a report titled "Assessment of the Economic Effects of Consumer Coupons" released Monday, the Bank of Korea (BOK) said the 13.5 trillion won in livelihood recovery payments disbursed last August and October had an estimated marginal propensity to consume of 0.20. This means newly created spending amounted to only 20% (2.8 trillion won) of the funds, while the remaining 80% likely replaced existing spending or was absorbed for other purposes such as savings. That does not mean the consumer coupons had no effect. By limiting their use to small business owners with annual sales of 3 billion won or less, the program provided some benefit to small self-employed operators and economies outside the greater Seoul area. The BOK also assessed that the program raised gross domestic product (GDP) by 0.12 percentage points.
Still, the fact that nearly 14 trillion won in fiscal spending generated less than 3 trillion won in additional consumption is not a matter to take lightly. The BOK also noted that the effects could have been greater had the timing of implementation, the differentiated support method, and the design of usage outlets been more finely tuned. Korean society has experienced large-scale cash-type support policies several times, including emergency disaster relief payments during COVID-19, livelihood recovery consumer coupons last year, and high oil price subsidies this year. The problem is that if such policies are repeated, they could increase the fiscal burden and become entrenched as a permanent welfare or economic stimulus tool.
In particular, at a time when excess tax revenue is expected due to the semiconductor boom, populist money-spreading could heighten inflationary pressure. Moreover, with first-quarter nominal GDP growth this year hitting 10.5%, the highest in 50 years, voices calling for expansionary fiscal policy on that basis are also growing louder. In fact, during the June 3 local elections, many candidates for local government heads competitively put forward cash-support pledges.
The funds for consumer coupons ultimately come from taxpayers' money. That is why the government must scrutinize the fiscal burden and policy effects more rigorously before resorting to short-term cash handouts. Policies are needed that allow small business owners and others to secure fundamental competitiveness on their own, rather than relying on temporary subsidies. We must not forget that the solution for reviving domestic demand lies not in repeated cash support but in expanding disposable income through innovation investment, job creation, and structural reform.
