12-08

Economic Woes Force Less Use of Credit Cards
By Lee Hyo-sikStaff ReporterCho Young-sik, a 42-year old worker at one of Korea's large business groups, is paying more attention these days to how much he is spending on his credit cards because he recently had a big fight with his wife over card bills.``My wife was really mad at me for spending too much money on drinks and dining-out with colleagues and friends. She was telling me that private education costs for our two children and other household expenses continue to go up, but my wage has remained the same. She was really serious when she told me that I should watch how much I spend on my cards,'' Cho recalled.Since then, he has been trying to refrain from going out with friends and instead goes home early after work.Cho's case is not an isolated one. According to the National Statistical Office (NSO), retail sales grew at their slowest pace in 21 months in October. Sales rose 1.6 percent to 20.6 trillion won from a year earlier, the lowest increase since January 2007, when it fell 0.4 percent.``I have lost tens of millions of won in equity investments over the past year, with my home price heading downhill amid the slumping real estate market. But mortgage interests have gone up. With shrinking assets and rising debt, spending less and saving more are the only ways of dealing with current difficulties. I think I will probably have to reduce spending further next year when the situation is likely to worsen,'' Cho said.Kim So-jung, a 29-year old bank teller at a U.S. bank operating here, is also feeling the pinch of the ongoing economic downturn. She used to go to Starbucks for a cup of Latte after lunch but has changed her after-lunch ritual. These days, she comes straight back to the office and drinks free instant coffee.``The future of my company is more uncertain than ever, as our parent company in the U.S. is grappling with the ongoing financial crisis. There's a rumor that the Korean branch may be closed. With unstable job security, I think I should spend less and save more for a rainy day,'' Kim said.She also invested a large portion of her salary in equity funds at home and abroad over the past year, losing more than 50 percent of the principal amid the worldwide stock market plunge. ``With unstable employment prospects and falling asset values, I think I should save as much cash as possible for bad days in the future.''Like Cho and Kim, many Koreans are tightening their purse strings to cope with rising debt and slow income growth as a result of deteriorating economic conditions and the tight job market.With the sluggish consumption, credit and debit card spending in November fell for the first time in four years. According to the Credit Finance Association (CFA) Friday, card spending, excluding cash advance services, totaled 25 trillion won last month, down 3.5 percent from a month earlier. It marks the first month-on-month decrease since 2003, when spending fell sharply after the credit card bubble burst.``It was the first time to see a drop in card expenditure since 2003. From 2004 through 2007, card spending always rose in November from October, as people tend to spend more toward the year's end. But this year, consumers are tightening their belts to cope with the unfolding business downturn,'' a CFA official said.He added households in particular are refraining from purchasing high-price durable goods, including automobiles, projecting that retailers here will likely not enjoy a year-end sales boom in December.leehs@koreatimes.co.kr



Parties fail to reach deal on budget

Leaders of political parties yesterday failed to settle their differences over tax-cuts and the 2009 budget plan, which the ruling camp says are critical to stave off an economic recession.The parties engaged in grueling late-night negotiations to reach a compromise, hoping to end the standoff, which has been delaying the National Assembly`s approval of the spending plan and other economic bills.The main opposition Democratic Party has claimed that those bills would not help allay the economic woes facing ordinary citizens, calling on the ruling camp to scrap or redraft them.Parties will resume the negotiations this morning, officials said.Floor leaders and policy chiefs of the ruling Grand National Party, the DP and the third negotiating group formed by the Liberty Forward Party and the Renewal of Korea Party attended the meeting.Rival parties sharply differed over proposed cuts in the real estate holding tax and value-added tax.The governing party pressed ahead with due legislative procedures to pass the spending plan and other economic bills while the DP boycotted and even physically blocked parliamentary committee sessions."The delay in approving the budget plan would put ordinary citizens and small- and mid-sized enterprises in even direr straits. The government, unlike at other times, should proactively execute the budget amid the global financial crisis," said GNP whip Hong Joon-pyo in a meeting of GNP legislators.The DP has boycotted a budget committee session at the National Assembly for four successive days. It has also boycotted all other sessions since Wednesday, protesting the budget fine-tuning session that took place despite the DP`s request for suspension.The party has demanded the ruling camp withdraw proposals to ease corporate, real estate and income taxes, all of which it says would only benefit the rich.Instead, it has proposed a 30-percent cut in value-added taxes on consumer goods to promote domestic demand.It also demands the budget bill be revised with the reflection of the economy next year, which is projected to be worse than the current budget draft assumes.Criticizing the foot-dragging by the DP, the GNP whip said that the DP has no reason to protest the tax cut schemes as the party decided to suspend the bills regarding cuts in inheritance and gift taxes, which the DP has vehemently opposed.The governing party plans to pass the budget bill by next Tuesday, the final day of the current parliamentary session. The party, which holds 172 seats in the 299-member Assembly, can pass the bill single handedly.Under the Constitution, the annual budget must be passed 30 days before a new fiscal year begins. The deadline - Tuesday for this year - has not been met in the last 10 years with 2002 as the only exception.DP leader Chung Sye-kyun, however, said that it would be difficult to pass it by next Tuesday."Even under the general-turned presidents, the budget bills were not railroaded through the Assembly. Given the time when the bill was handed over and when the budget fine-tuning began, it is impossible to pass it by Tuesday next week," Chung said in an interview.In September, the government submitted the 273.8 trillion won ($185 billion) proposal, up 6.5 percent from this year. But the plan was upwardly revised by about 10 trillion won and resubmitted to the Assembly on Nov. 7 following the opposition calls for the plan to reflect the current economic woes.Should those pending bills cruise through parliamentary committees, the bills could fail to be presented at the Assembly`s plenary session as they have to go through the legislation committee chaired by a DP legislator.Some GNP members, however, presume that they could bypass the legislation committee and persuade Assembly Speaker Kim Hyong-o to exert his power to present it to the plenary session. Kim, however, hinted at his opposition to the idea.By Song Sang-ho