World Economy

South Koreans’ Overseas Spending at Record High

A South Korean duty-free shop crowded with customers.A South Korean duty-free shop crowded with customers.

South Koreans spent a new record high amount of money abroad last year on increased outbound travel despite an economic slump and sagging domestic consumption, data showed Saturday.

Expenditures on ordinary foreign trips, excluding stays for study, jumped 7.4% on-year to $23.1 billion in the year, according to the Bank of Korea and the Ministry of Culture, Sports and Tourism, Yonhap reported.

South Korea’s gross domestic product is projected to have expanded 2.7% in 2016 from a year earlier, with domestic spending growing 2.8%.

South Koreans’ overseas spending has been on a constant rise from $15.5 billion in 2011 to $16.5 billion in 2012, $17.3 billion in 2013 and $19.4 billion in 2014.

The trend is attributable to an increasing number of people making overseas trips during major holidays and vacations.

A total of 22.38 million South Koreans visited foreign nations last year, up 11.6% from a year earlier, according to a tally compiled by the Korea Tourism Research Institute.

“No matter how bad the economic conditions are, the people’s income level has improved in general and there are various travel products leading to a rise in the number of outbound travelers,” a tour agency official said. “Chances are high that the amount of overseas spending will set a new record this year.” 

Meanwhile, South Korea’s duty-free outlets have sharply increased their sales but struggled to raise actual profits amid fierce competition, data indicated Saturday.

The combined revenue of local duty-free stores hit a record high of 12.2 trillion won ($10.4 billion) last year, according to the Korea Customs Service.

It marks a 33.5% rise from a year earlier. Their sales jumped to 8.3 trillion won in 2014 from 6.8 trillion won in 2013. Having suffered a fall in 2015, hit by the impact of MERS, their sales bounced back last year.

Despite growth in sales, business conditions for the nation’s duty-free chains do not look rosy.

“Profitability has worsened due to an increase in costs in general amid deepening competition from a considerable rise in the number of duty-free stores in a short time,” an industry official said. “Excessive competition is occurring as they are staging a reckless marketing campaign for survival.”

Lotte Duty Free is projected to have reaped 5.9 trillion won in sales last year, a sharp rise from 4.3 trillion won in 2015. But its operating profit ratio has dropped to 6-7% from 8.9% in 2015.

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