Government Expresses Concern Over Domestic Demand Impact Due to Social Distancing for Three Consecutive Months... Expansion of Geopolitical Risks

Ministry of Economy and Finance Announces 'Recent Economic Trends (Greenbook February Issue)'
January Department Store Sales and Domestic Card Approval Amounts Increase

[Asia Economy Sejong=Reporter Kwon Haeyoung] The government has expressed concerns about the domestic economy for three consecutive months. It analyzed that the spread of the COVID-19 variant virus could have a negative impact on the economy. Regarding external factors, it diagnosed that geopolitical risks have increased volatility in raw materials and financial markets, expanding uncertainty.

The Ministry of Economy and Finance stated in the 'Recent Economic Trends (Green Book February issue)' released on the 18th, "Our economy has seen a continued export boom and a significant increase in employment, but concerns remain about the impact on domestic demand due to the spread of the variant virus."

The Ministry revised its outlook to 'domestic demand improvement' after implementing the 'gradual easing of daily life' policy in November last year, but returned to 'concerns about domestic demand impact' from December last year following strengthened year-end quarantine measures.

However, private consumption in the fourth quarter of last year increased by 1.7% compared to the previous quarter. It rose by 6.3% compared to the same period last year. Retail sales expanded by 2% month-on-month and 6.5% year-on-year, supported by increases in durable and non-durable goods despite a decrease in semi-durable goods.

Department store sales increased by 30.8% year-on-year in December last year and rose by 31.5% in January this year. Domestic card approval amounts also increased by 18.1% in December last year and by 17.5% in January this year. On the other hand, domestic sales of Korean-made passenger cars decreased by 19.7% last month.

The Ministry of Economy and Finance said, "The increase in department store sales and the rise in consumer sentiment index in January retail sales are positive factors," but added, "The decrease in domestic sales of Korean-made passenger cars is expected to act as a negative factor."

It stated that the impact of the social distancing easing measures announced that day on domestic demand needs to be observed. The government will ease social distancing from the 19th, changing the previous 'private gatherings of 6 people, business hours until 9 p.m.' to '6 people, until 10 p.m.'

An official from the Ministry said, "Even if the spread of the variant virus expands, social distancing is being eased, so we need to observe how the (domestic demand) impact will unfold," adding, "Easing social distancing is positive, but since the number of confirmed cases exceeds 100,000, there is a possibility of voluntary distancing and contraction of consumer sentiment, so we need to watch a little longer."

Regarding external economic conditions, it diagnosed, "With supply chain disruptions and inflation expansion, the possibility of major countries shifting monetary policies has increased, while the spread of the variant virus and geopolitical risks have increased volatility in raw materials and financial markets, expanding uncertainty." It added, "We will thoroughly manage price stability and livelihood stabilization proactively while strengthening the inspection and management of domestic and external risks," and "We will also focus on responding to COVID-19 spread, minimizing damage, and supporting economic recovery."

Employment increased by 1,135,000 compared to the same month last year, with the number of employed persons reaching 26,953,000 last month. The consumer price index in January rose by 3.6% compared to one year ago.

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