Government: "Domestic demand gradually recovering, manufacturing-centered economic slowdown continues"

Ministry of Economy and Finance, April Recent Economic Trends

The government evaluated that domestic demand in our economy is 'gradually recovering.' This assessment is due to recent improvements in consumer sentiment and an expanded increase in employment. Regarding the economic slowdown, it was limited to 'manufacturing-centered' sectors, and a more positive diagnosis of the economic situation was presented compared to before.

On the 14th, the Ministry of Economy and Finance stated in the 'Recent Economic Trends (Green Book) for April 2023' that "Recently, our economy is experiencing a slowdown in inflation while domestic demand is gradually recovering, centered on face-to-face activities; however, the manufacturing-centered economic slowdown trend continues due to sluggish exports and facility investment."

The most notable part of this evaluation is the assessment of domestic demand. While it was diagnosed in February-March this year that the 'speed of domestic demand recovery has slowed,' this time it is viewed as 'gradually recovering.'

The background for this evaluation includes improvements in consumer sentiment, an expanded increase in employment, and growth in overall industrial production. First, the Consumer Confidence Index (CCSI), a general sentiment index regarding the economic situation, rose to 92.0 in March, marking the highest level since June last year (96.7). This is interpreted as reflecting the reduced inflation rate and expectations for a return to normal life following the full lifting of mask mandates. The All-Industry Business Survey Index (BSI), a corporate sentiment indicator, also increased by 3 points from the previous month to 72 in March.

The increase in employment expanded, and inflation growth slowed. Employment in March rose by 469,000 compared to the same month last year, marking the largest increase in 10 months. The consumer price inflation rate in March was 4.2%, down 0.6 percentage points from the previous month (4.8%).

Consumption and investment are also increasing. According to the February Industrial Activity Trends, retail sales rose by 5.3% compared to the previous month, facility investment by 0.2%, and construction investment by 6.0%. Production saw a decline in manufacturing output (-3.2% compared to the previous month), but service sector production increased by 0.7%, resulting in an overall industrial production increase of 0.3%.

However, exports remain sluggish. Exports in March decreased by 13.6% compared to the same month last year, totaling $55.12 billion. From the 1st to the 10th of this month, exports also fell by $1.3 billion compared to the same period last year, with semiconductor exports sharply dropping by 39.8% to $1.77 billion. Accordingly, the Ministry of Economy and Finance narrowed the scope of the economic slowdown to 'manufacturing-centered' sectors.

An official from the Ministry of Economy and Finance said, "Externally, expectations for the China reopening effect coexist with downside risks such as financial instability in vulnerable sectors due to monetary tightening and the prolonged Russia-Ukraine war, maintaining global economic uncertainty. Based on firm price and livelihood stabilization and thorough domestic and external risk management, we will focus our efforts on enhancing overall economic vitality?including exports, investment, and domestic demand?and structurally improving the economic foundation."

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