Planned to encourage consumer spending and revitalize the domestic market, the government’s designation of Oct. 2 as a temporary holiday to fill the chain of holidays in early October comes amid discouraging indices and dilemmas faced by smaller merchants.

“We still haven’t decided whether to keep our store closed throughout the holiday season or to partially open,” said Kim Rae-won, an owner of a small restaurant in central Seoul. “It is hard to figure out whether we will make more or lose more by opening the business during the period. Since nearly half of October will be off days, I fear that I may not even earn enough to pay the rent (for the restaurant) next month.”

Cash-strapped SMEs and owner-operators are set to face a plausible decline in their productivity during the golden week, both for the reduction of working days and for the increased labor costs.

A survey conducted by the Korea Federation of Small and Medium Businesses showed that 69.1 percent of small-sized business operators were concerned about the obvious sales reduction, while 27.1 percent worried about the lack of liquidity during the holidays.

Also among the challenges for smaller sellers is that a record number of people are expected to board on an overseas trip during the upcoming holidays, thus skipping the conventional family gatherings and commemorative rites. The tourism industry anticipates that the total number of outbound travelers during the 10-day holiday is likely to exceed 1.1 million, given flight reservations so far.

With consumer sentiment remaining low, and grocery prices continuing to soar, the increase in real income remains slower than the market inflation rate, recent data showed.

According to Statistics Korea last month, the average real household income -- indicating the income amount as opposed to the inflation rate -- stood at 4.2 million won ($3,700) as of the second quarter, down 1 percent from the same period last year and marking the seven straight quarterly decline.

The Consumer Composite Sentiment Index for August came to 109.9, down 1.3 points on-month and making the first decline in the figure since January this year.

Statistics by the Korea Customs Service also showed that the fresh food sector saw an on-month increase of 18.3 percent last month, recording the largest leap in more than six years.

“Household incomes and consumption may improve in the long-term but for the time being, the increasing food prices are posing a burden upon market consumers,” said Lee Chang-sun, researcher at LG Economic Research Institute.

Facing such inflation in market necessities, the Korea Agro-Fisheries & Food Trade Corp. sought to induce consumers to traditional markets, citing that key agricultural and livestock products were some 18 percent cheaper there than in large retail stores.

“Despite some seasonal influence, we expect a relatively smooth supply of agricultural, livestock and fisheries product this year as the Chuseok holidays fall in October which is relatively later than usual,” said an official.

SME employees will also find it relatively difficult to take their days off and participate in spending, a survey showed.

According to the Korea Employers’ Federation, the average Chuseok holidays for enterprises with less than 300 employees was 8.3 days, shorter than the 9.7 days at larger companies.

Also, only 56.2 percent of such small-sized firms said that they would close business for the entire 10 days, while the corresponding figure in large companies went as high as 88.6 percent.

Anticipating such challenges, the government earlier decided to prolong the deadline for public procurement for a few additional days and pay out subcontract fees to SMEs ahead of the holidays so as to help with their liquidity.

By Bae Hyun-jung (tellme@heraldcorp.com)