KDI "Deterioration of External Conditions After 'Ukraine Situation'... Expansion of Downside Risks to Economy"

[Asia Economy Sejong=Reporter Son Seon-hee] The possibility of the South Korean economy contracting has increased as raw material prices have surged sharply due to the Russia-Ukraine war situation.

The Korea Development Institute (KDI) analyzed in its April Economic Trends report published on the 7th, "Recently, our economy has maintained a moderate recovery trend, but external conditions have worsened since the Ukraine situation, expanding downside risks to the economy."

KDI stated, "Since the outbreak of the Ukraine situation, corporate sentiment has deteriorated significantly, especially in key industries, due to the sharp rise in raw material prices and concerns about external uncertainties," adding, "With the rapid increase in raw material prices worsening the trade balance and domestic consumer prices rising sharply, there is a possibility that the recovery of our economy will be constrained in the future." It further noted, "As downside risks to the global economy increase, corporate sentiment indices have plummeted, particularly among export companies sensitive to external conditions and key industries such as electronics, video, telecommunications equipment, and automobiles."

KDI has maintained this negative outlook for five consecutive months since December last year, when the Omicron variant virus began to spread in earnest, using the phrase "expansion of downside risks to the economy."

However, regarding the domestic economy, it evaluated that a "moderate economic recovery" continues. KDI analyzed, "In February, despite the contraction of face-to-face service industries, a moderate economic recovery continued mainly in manufacturing," adding, "Consumption recovery was sluggish as face-to-face sectors such as retail, lodging, and restaurants were weakened by the spread of COVID-19, but the negative shock was smaller compared to previous spread periods, as employment continued to improve favorably." It also stated, "Manufacturing led the moderate improvement trend of our economy by maintaining stable growth centered on ICT-related industries such as semiconductors."

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