Government: "Uncertainty Continues Due to COVID-19, but Downside Risks to Real Economy Ease"

Ministry of Economy and Finance Recent Economic Trends June Issue Published
Domestic Card Approval Amount Turns Positive After Three Months

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kim Hyun-jung] The government has assessed that the downside risks to the domestic real economy, which had appeared after the outbreak of the novel coronavirus infection (COVID-19), are somewhat easing. In fact, last month's domestic card approval amount turned positive compared to the previous year for the first time in three months, and the consumer sentiment index improved for the first time since the domestic spread of COVID-19.

The Ministry of Economy and Finance stated in the 'Recent Economic Trends (Green Book June issue)' published on the 12th, "Although uncertainty caused by COVID-19 continues, the contraction in domestic demand is easing, and the decline in employment is shrinking, so the downside risks to the real economy are somewhat alleviated." This somewhat softened the previous assessment of 'expanding downside risks' last month, lowering the level of concern.

However, risk factors such as resurgence and instability in emerging markets still exist. The Ministry evaluated, "Externally, while financial markets show a stable trend and some indicators have improved due to the reopening of major economies, concerns about a global economic recession persist due to risk factors such as the possibility of COVID-19 resurgence and instability in emerging markets."

The government's judgment that the situation has somewhat improved can be confirmed in the preliminary figures related to private consumption in May. First, last month's domestic card approval amount increased by 5.3% compared to the same period last year. This marks a turnaround to positive growth after three months of -4.3% in March and -5.7% in April. Consumption was mainly concentrated in non-face-to-face channels such as online. During this period, department store and discount store sales recorded -9.9% and -9.3% compared to the previous year, while online sales jumped 21.9%, increasing the growth rate compared to April (19.9%). In particular, the decline in department store sales improved compared to the previous month (-14.7%), but discount store sales worsened about tenfold compared to the previous month (-0.9%). Domestic passenger car sales increased by 14.0% due to the impact of the reduction in individual consumption tax, continuing the growth trend for three consecutive months following 13.2% in March and 11.6% in April.

The consumer sentiment index in May was 77.6, significantly below the baseline of 100, but improved by 7.6 points compared to the previous month (70.8). This is the first improvement compared to the previous month in four months since January this year (104.2), when COVID-19 cases first appeared domestically.

Industrial production across all sectors in April decreased by 2.5% compared to the previous month. Service industry production increased by 0.5%, but manufacturing production fell by 6.0%. Retail sales and facility investment increased by 5.3% and 5.0% respectively compared to the previous month, but construction investment showed a decline of 2.4%. Exports in May sharply dropped by 23.7% year-on-year due to reduced demand from major countries and a decrease in working days (-1.5 days).

The number of employed persons in May was 392,000 fewer than the same month last year, and stock prices rose due to expectations from the reopening of major economies. The exchange rate rose (weakened) due to concerns over US-China conflicts, and government bond yields fell. The housing market saw sales prices rise by 0.14% and jeonse (long-term lease) prices by 0.09%, with the rate of increase narrowing compared to the previous month.

This content was produced with the assistance of AI translation services.