According to an analysis by Yonhap News based on data from the National Data Agency's national statistics portal and industrial activity trends, the average industrial production index from January to May this year rose by 2.7% compared to the same period last year. Service sector production increased by 4.2%, but the growth rate for the accommodation and food services sector was only 0.9%. While accommodation services saw a 2.7% increase, the restaurant and bar sector grew by just 0.6%.
A representative from the data agency noted, "The recent rise in foreign tourists, along with domestic consumption stimulus policies such as recovery coupons and support for high fuel prices, have contributed to the growth in service sector production. However, the decline in food consumption due to population decrease and changes in drinking and dining culture have limited growth in the restaurant and bar sector."
In contrast, high-value-added industries have shown growth rates nearing 10%. The financial and insurance sectors increased by 8.7%, while professional, scientific, and technical services grew by 9.5%.
However, from January to May this year, the production in the accommodation and food services sector has emerged from a decline. In 2024, it recorded a -1.9% growth, and last year it saw a -2.5% decline.
Quarterly, after recording a -2.0% in the second quarter of 2023, the sector experienced nine consecutive quarters of decline until the second quarter of last year (-1.9%), before rebounding with a 1.4% increase in the third quarter. It has since stabilized at 0.0% in the fourth quarter and 0.3% in the first quarter of this year.
The government believes that while the accommodation and food services sector has entered a recovery phase, rising inflation in the second half of the year could pose obstacles to the recovery of consumer sentiment.
Currently, the exchange rate of the Korean won against the dollar is in the 1,500 range, which is expected to increase consumer prices with a lag. Additionally, seasonal factors such as high temperatures and heavy rainfall could lead to price volatility in agricultural products, affecting dining and grocery prices.
High interest rates are hitting small business owners hard. As of the end of the first quarter, the outstanding loans of self-employed individuals exceeded 1,100 trillion won, marking a record high. The amount of overdue loans for self-employed individuals reached 22.3 trillion won, with a delinquency rate exceeding 2%.
If benchmark interest rates continue to rise, the repayment burden on self-employed individuals will increase, potentially worsening financial stability indicators. According to national tax statistics, the number of business closures among operators who have been in business for over five years reached an all-time high last year, particularly among restaurants that have been operating for over 20 years.
The Bank of Korea emphasized in its financial stability report last month that the proportion of self-employed individuals in South Korea is higher than in major countries, making them a crucial part of the economy. Therefore, it is essential to assess financial soundness and potential risks from a financial stability perspective.
The Bank of Korea analyzed that self-employed loans accounted for 28.5% of total financial sector loans at the end of the first quarter. It also noted that financial stability risks in the self-employed sector are concentrated among small and micro-service businesses, older self-employed individuals, and vulnerable borrowers, making them more susceptible to changes in interest rates and the service sector's economic conditions.
* This article has been translated by AI.
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