KDI Forecasts Possible Rebound in Second Half... "Increase in Indicators Suggesting Economic Bottom"

KDI to Publish 'June Economic Trends' on 11th
"Narrowing Decline in Semiconductor and China Exports"

The Korea Development Institute (KDI), a government-funded research institute, diagnosed that “our economy is sluggish mainly in the manufacturing sector, but indicators suggesting a bottoming out of the economy are increasing.” This implies the possibility that the previously sluggish economy may soon pass its bottom and rebound.

According to KDI’s ‘June Economic Trends’ report published on the 11th, although exports continue to sharply decline due to the global economic slowdown, the decrease in semiconductor and exports to China is narrowing. Semiconductor exports fell by 34.5% year-on-year in March and the decline widened to -41% in April, but the decrease somewhat eased to -36.2% in May. Exports to China also show signs of easing export sluggishness with declines of -33.1% in March, -26.5% in April, and -20.8% in May.

KDI had assessed since last March that “economic sluggishness is continuing.” However, last month it explained that “the sharp downward trend is somewhat calming down thanks to the easing of domestic demand weakness,” and this month it went a step further by suggesting the economy may be passing its bottom. This aligns with the government’s outlook that economic conditions will improve in the second half of the year.

Consumer sentiment is also favorable. KDI evaluated that “the service sector, centered on face-to-face industries, continued a favorable trend, and consumption-related sentiment indices are also showing signs of recovery.” In particular, employment in the service sector has maintained a strong upward trend, and the consumer sentiment index has been gradually rising since March. Although the seasonally adjusted retail sales index decreased by 2.3% month-on-month in April, indicating a slight weakening in consumption growth, the consumer sentiment index reflecting consumers’ economic perceptions and sentiment in May recorded 98.0, showing an upward trend.

The consumer price index in May rose by 3.3%, lower than the 3.7% increase in the previous month. KDI explained, “The consumer price increase slowed down as supply-side inflationary pressures eased and the base effect was reflected.” Despite increases in electricity and city gas rates, import prices fell and the base effect worked, gradually stabilizing the upward trend in consumer prices.

Regarding the financial market, KDI assessed that “market interest rates rose due to expectations of prolonged monetary tightening, but the overall financial market, including the short-term money market, remains stable.” However, in the case of construction investment, it added, “Although a high growth rate was maintained, the sluggishness of related leading indicators suggests the possibility of a slowdown in the growth trend in the future.”

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