"High Uncertainty in the Real Economy"... Ministry of Economy and Finance Issues Gloomy Assessment

'Recent Economic Trends' (also known as the Green Book) (Photo by Yonhap News)

[Asia Economy Reporter Kwangho Lee] The government has raised its warning level on the Korean economy, citing the "high uncertainty in the real economy" due to the novel coronavirus disease (COVID-19) crisis. This marks a shift from last month's assessment that the downside risks to the real economy were somewhat easing, expressing strong concerns over the continued decline in exports and production caused by global demand contraction amid COVID-19.

On the 17th, the Ministry of Economy and Finance diagnosed in its 'Recent Economic Trends,' also known as the Green Book, that "Recently, our economy has seen a reduction in employment decline and an improvement trend in domestic demand-related indicators; however, concerns over delayed global economic recovery persist due to the ongoing global spread of COVID-19 and conflicts among major countries."

Accordingly, the Ministry stated, "To ensure the recent improvement in domestic demand leads to a definite economic rebound momentum, we will steadily implement key tasks in the second half economic policy direction and promptly execute the third supplementary budget (supplementary budget), while accelerating efforts to establish a leading economic foundation for the post-COVID era, such as the Korean New Deal."

According to the major economic indicators analyzed by the Ministry in the Green Book, industrial activity in May showed total industrial production decreased by 1.2% compared to the previous month. Service sector production rose by 2.3%, but manufacturing production fell by 6.7%. Retail sales increased by 4.6%, whereas facility investment and construction investment declined by 5.9% and 4.3%, respectively.

Exports in June decreased by 10.9% year-on-year. The decline narrowed due to the resumption of economic activities in major countries and an increase in working days (2 days more than the previous year).

Consumer sentiment and business sentiment indices in June rose by 4.2 points and 2 points, respectively, compared to the previous month. The coincident index (cyclical component) and leading index for May fell by 0.8 points and 0.3 points, respectively, compared to the previous month.

Meanwhile, employment in June decreased by 352,000 compared to the previous year, with the decline narrowing mainly in the service sector. Consumer prices remained flat as the decline in petroleum prices narrowed and livestock product prices rose, while the core inflation rate, which reflects the underlying price trend, increased by 0.6%.

In June, the domestic financial market saw stock prices rise, the exchange rate fall (strengthening), and government bond yields increase, driven by expectations of economic recovery following improvements in major countries' economic indicators. The housing market saw both sales prices and jeonse (long-term lease) prices increase by 0.41% and 0.26%, respectively, in June.

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