'The Harsh Life of Ordinary People'... Alcohol and Tobacco Consumption Hits Another Record High

COVID-19 Fueled Alcohol and Tobacco Consumption
Record Highs Broken Again in Q3 Last Year

[Asia Economy Reporter Kim Eunbyeol] As the COVID-19 pandemic has continued for over a year and a half, the public's consumption of alcohol and tobacco has reached record highs once again. Alcohol and tobacco are representative items whose consumption tends to increase during economic downturns. Although this year's annual economic growth rate is expected to be in the 4.0% range, indicating a rebound compared to last year, it suggests that the lives of ordinary people remain difficult.

According to the Bank of Korea on the 17th, household expenditure on alcoholic beverages and tobacco in the second quarter of this year reached 4.3554 trillion KRW (seasonally adjusted, nominal basis). This is the largest quarterly amount since the Bank of Korea began compiling related statistics in 1970. In the third quarter of last year, influenced by the COVID-19 situation, quarterly expenditure on alcohol and tobacco reached 4.2587 trillion KRW, setting a record high, which has now been surpassed again, meaning that in just one quarter, the public spent more than 4.3 trillion KRW on alcohol and tobacco.

Looking at the Household Trend Survey by Statistics Korea, which aggregates monthly expenditures of households with two or more members, the average monthly amount spent on alcohol and tobacco has also increased. In the second quarter of this year, the average monthly consumption expenditure on alcoholic beverages and tobacco nationwide was 40,000 KRW, up 1.6% compared to the same period last year. In particular, the amount spent on alcohol increased. Alcohol expenditure was 17,000 KRW, up 7.2% year-on-year. Conversely, tobacco expenditure was 23,000 KRW, down 2.2%.

The increase in spending on alcohol and tobacco appears to be driven by the worsening economic conditions. After the 1997 Asian financial crisis, expenditure on alcohol and tobacco surged by about 16-20% on a quarterly basis. In the case of the COVID-19 crisis, the strengthening of social distancing measures to control the pandemic led to the spread of the 'hon-sul' culture, where people enjoy drinking alone at home, which also resulted in increased alcohol consumption.

On the other hand, spending on leisure activities such as entertainment, sports, and culture has yet to recover to pre-COVID-19 levels. Although people are going out wearing masks due to fatigue from the prolonged pandemic, and spending has improved compared to last year, it is still insufficient to return to previous levels. In the second quarter, expenditure on entertainment, sports, and culture was 14.4317 trillion KRW, up from 12.67 trillion KRW in the first quarter. However, compared to the fourth quarter of 2019, just before COVID-19 (16.7147 trillion KRW), there remains a gap of about 2 trillion KRW in quarterly spending. Before COVID-19, entertainment and sports culture were growing and continuously setting new records, but the post-pandemic situation reflects that returning to previous levels is not easy. Similarly, spending on restaurants and accommodation services has not recovered to pre-COVID-19 levels. In the second quarter, expenditure on restaurants and accommodation services was 21.3327 trillion KRW, falling short of the 23.9356 trillion KRW recorded in the fourth quarter of 2019.