KDI "Ukraine Crisis Causes Sharp Rise in Oil and Commodity Prices... Downside Risk for Korean Economy"

[Asia Economy Sejong=Reporter Kwon Haeyoung] Concerns have been raised that uncertainty in our economy has increased due to the sharp rise in prices of crude oil and other raw materials following Russia's invasion of Ukraine.

The Korea Development Institute (KDI) stated in its 'March Economic Trends' report published on the 7th, "The prices of major raw materials, including international oil prices, have surged due to concerns over supply and demand instability, which is highly likely to act as a downside factor for our economy."

KDI analyzed, "The negative impact of the strengthened spread of COVID-19 on service sector production and business sentiment indicators has been limited," adding, "However, following Russia's invasion of Ukraine at the end of February, geopolitical risks have escalated, significantly expanding economic uncertainty."

It continued, "The global economy is increasingly likely to slow down due to the worsening Ukraine situation and persistent high inflation," noting, "Leading economic indicators related to the economy are declining in most regions, and fiscal support is also decreasing, causing major countries' 2022 growth forecasts to be continuously revised downward."

According to Statistics Korea, the overall industrial production growth rate in January was 4.3%, down from 6.8% the previous month. In manufacturing, the shipment growth rate shrank from 4.0% to 1.6%, but the inventory ratio fell from 113.2% to 112.7%, and the average operating rate rose from 77.6% to 78.3%.

Retail sales growth rate and consumer sentiment index declined. January retail sales increased by 4.5%, narrowing the growth from the previous month (6.8%), and the consumer sentiment index fell to 103.1 from 104.4 due to increased domestic and international uncertainties.

The coincident index cyclical component in January rose to 102.4 from 101.8 the previous month, while the leading index cyclical component, which predicts future economic conditions, fell to 100.1 from 100.2.

Exports in February increased by 20.6%, up from 15.2% the previous month, but uncertainty due to recent geopolitical risks is expanding. In the same month, consumer prices rose by 3.7%, recording a higher increase than the previous month (3.6%).

KDI diagnosed, "Consumer prices continued a high upward trend centered on petroleum products and personal service prices," adding, "The recent sharp rise in international oil prices may act as an additional inflationary pressure."

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