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Thursday, June 13, 2024

Korea shows signs of exports-led economic recovery

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A port in Korea's southern port city of Busan [YONHAP]
A port in Korea’s southern port city of Busan [YONHAP]

Korea is experiencing an exports-led economic recovery, the Ministry of Economy and Finance said in its monthly report.

“Signs of an economic recovery centering on exports have been rising, and inflationary pressure has been moderating. But the pace of recovery among sectors has been different,” the ministry said in the report.

External uncertainties also linger, stemming from the ongoing war between Russia and Ukraine, the unstable Middle East situation, among other issues, and concerns about a global economic slowdown remain high, though expectations have grown for a turnaround in the IT sector, the report read.

After a yearlong downturn, exports, a key growth engine, have logged on-year monthly gains from October last year to rise 5.1 percent in December, driven by strong semiconductor sales.

The government expected exports to advance 8.5 percent this year to reach a record high of over $700 billion, rebounding from a 7.4 percent decline in 2023.

But domestic demand remained weak amid high prices and interest rates.

Retail sales, a gauge of private spending, inched down 0.3 percent on-year in November.

The figure compared with a 4.5 percent fall the previous month, but the improvement was due mainly to a low base effect and temporary factors, such as major discount events for vehicles and other items, according to the Korea Development Institute.

Output from the service sector and facility investment also remain sluggish, government data showed.

Policymakers have said prices have moderated at a slower pace than expected.

In December, consumer prices, a key gauge of inflation, rose 3.2 percent year-on-year, the fifth consecutive month that the prices have stayed above the 3 percent level, though the growth has slowed down for two months in a row.

Inflation grew 3.6 percent on-year in 2023 and is projected to ease further to come to 2.6 percent in 2024, according to government forecast.

On Thursday, the Bank of Korea froze its key interest rate for the eighth straight session at 3.5 percent, noting that any rate cut would not be an option for at least six months to come.

“The government will put policy priority on supporting the livelihoods of the people based on stable prices, managing real estate project financing and other potential risks, and boosting the economy also for the future generation,” the ministry said.

BY SEO JI-EUN,YONHAP [seo.jieun1@joongang.co.kr]