Government Officially Mentions 'Concerns Over Economic Slowdown'

Recent Economic Trends June Issue

Lee Seung-han, Director of Economic Analysis at the Ministry of Economy and Finance, is presenting the recent economic trends for June 2022 on the morning of the 17th at the Government Complex Sejong in Sejong City.
[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Son Seon-hee] The government has officially expressed concerns about a ‘economic slowdown,’ raising its vigilance over the complex crisis surrounding the Korean and global economies. This is the first time in two years and three months since March 2020, when the COVID-19 outbreak began to spread in earnest and an ‘economic contraction’ diagnosis was issued. The complex risks such as high inflation caused by the Russia-Ukraine war and global supply chain disruptions, monetary tightening by major countries, and export slowdown are occurring simultaneously, intensifying the sense of crisis over a potential recession.

On the 17th, the Ministry of Economy and Finance stated in the June issue of ‘Recent Economic Trends (Green Book)’ that “Recently, our economy has seen continuous employment recovery and a moderate improvement in domestic demand centered on face-to-face service industries. However, due to worsening external conditions, high inflation persists, and concerns about an economic slowdown are rising amid sluggish investment and weakening export recovery.”

The Green Book is the government’s most timely economic diagnosis of the current economic situation. After going through the COVID-19 crisis, the term ‘economic recovery’ was mentioned throughout last year, but uncertainty expanded again from March this year, eventually triggering warning signs of an economic recession. The government lowered this year’s economic growth target from the previous 3.1% to 2.6% the day before, which is lower than the forecasts of the Korea Development Institute (2.8%), the Organisation for Economic Co-operation and Development (2.7%), and the Bank of Korea (2.7%).

The basis for the government’s concern about the economic slowdown is the continuously expanding global inflationary pressure and the sluggish exports, which are a key pillar of the Korean economy. Lee Seung-han, head of the Economic Analysis Division at the Ministry of Economy and Finance, said, “Rising interest rates can affect corporate investment and household consumption,” adding, “Due to China’s lockdown measures and the Cargo Solidarity strike, it is difficult for the export growth rate in June to reach double digits.” He also added, “We also took into account that the coincident index (cyclical component) fell for two consecutive months in April.”

However, the government explained that it has not definitively concluded that the economy is transitioning into a ‘slowdown.’ Lee said, “It is difficult to say ‘turnaround’ in advance,” and asked to understand that “the government’s vigilance has increased regarding the parts where the economy could weaken.”

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