What impact will South Korea’s tourism revenue plummet on the South Korean economy?

Data released by the Korea Tourism Organization shows that from January to August this year, the number of foreign tourists to South Korea was 8,864,182, a sharp drop of 22.8% year-on-year. During the same period, the number of outbound tourists from South Korea increased by 17.7% year-on-year, reaching 17.39551 million, and the number of outbound tourists was equivalent to about 1.96 times that of inbound tourists.

Affected by this, South Korea’s tourism balance deficit is showing an expanding trend. Data show that from January to May this year, South Korea’s tourism revenue and expenditure deficit soared 239.3% year-on-year to US$5.0678 billion, setting a record for the same period in history.

According to analysis, due to the impact of "THAAD", the sharp decline in Chinese tourists to South Korea may be the main reason for the decrease in foreigners visiting South Korea. From January to August this year, there were 2,873,566 Chinese tourists visiting South Korea, a year-on-year decrease of 48.8%. From March to August this year, Chinese tourists to South Korea dropped by as much as 62.2% year-on-year.

The Korean tourism industry pointed out that due to the sharp decrease in foreign tourists, the Korean tourism industry may fall into an "L"-shaped recession. The Korea Tourism Organization predicts that if factors such as China’s anti-Sahabian measures and the North Korean nuclear threat continue to ferment, the number of foreign visitors to South Korea this year is expected to decrease by 27.2% year-on-year.

Some Korean media estimate that the decline in Chinese tourists this time may reach an unprecedented 50%, or even 60-70%! This means that South Korea’s tourism revenue will be cut in half at least in the next year. Yonhap News Agency cited the example of South Korea's duty-free shops, which are popular among Chinese tourists. Last year, the market size of South Korea's duty-free shops was 12.27 trillion won, 72% of which was paid by foreign tourists, most of whom were Chinese. Assuming that Chinese tourists account for 70% of purchases, the amount is approximately 8.6 trillion won. If the halving of Chinese tourists continues for one year, the sales of Korean duty-free shops will decrease by 4.3 trillion won (approximately RMB 24 billion).

In January 2017, South Korea’s unemployed population exceeded 1 million again in seven months, and South Korean society also has a youth unemployment rate approaching 10%. The livelihood problems of such a huge population are also likely to be exacerbated by restrictions in China's tourism and cultural sectors.