Government Diagnoses 'Mitigation of Downside Risks in Gyeonggi'... "Expecting Rebound in Second Half"

Ministry of Economy and Finance June Recent Economic Trends
Economic Sentiment Improvement Speed ↑... Employment Indicators Favorable

The government has presented an analysis indicating that the economic slowdown is weakening. This is an optimistic assessment made one year after expressing concerns about the economic downturn. Although it still notes that the slowdown continues, the basis is that domestic demand and employment are showing positive signs.

On the 16th, the Ministry of Economy and Finance explained in the ‘June Recent Economic Trends (Green Book)’ that “Recently, our economy has been experiencing a continued slowdown centered on exports and manufacturing amid a sustained decline in inflation,” but also noted “a mild recovery in domestic demand, improvement in economic sentiment, and solid employment growth, which have somewhat eased downside risks.”

Lee Seung-han, head of the Economic Analysis Division at the Ministry of Economy and Finance, said, “The phrase ‘downside risks have somewhat eased’ reflects a cautious assessment that there will be no further economic slowdown and that the economy is gradually bottoming out,” adding, “There is an expectation that the economy will improve in the second half of the year.”

This is the first time in a year that the government has mentioned the possibility of economic improvement. In June last year, the government expressed concerns about an economic slowdown, citing “persistent high inflation due to worsening external conditions, along with sluggish investment and weakening export recovery.” In January, it assessed that concerns about the slowdown had ‘expanded,’ and officially acknowledged the economic slowdown the following month.

The background for this assessment includes the upward trend in economic sentiment. Last month, the Consumer Sentiment Index (CSI) rose 2.9 points from the previous month to 98.0. Although it had plummeted to 90.2 in February, it has risen for three consecutive months since then. The Business Survey Index (BSI) for all industries also increased by 4 points to 76. Four months ago, the BSI recorded its lowest level in 2 years and 7 months at 63. Both indicators are still below 100, meaning negative views predominate, but they are gradually improving.

Inflation and employment indicators are also positive factors. Last month, consumer prices rose by 3.3%, marking the lowest level in 1 year and 7 months. Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho stated that “inflation in the 2% range will be seen by next month at the latest,” indicating a clear stabilization trend. Employment increased by 351,000 compared to the same month last year, and the unemployment rate fell by 0.3 percentage points to 2.7%. The employment rate of the working-age population reached 69.9%, the highest level since statistics began.

However, the export and manufacturing sectors remain sluggish. Last month, exports decreased by 15.2% compared to the same month last year due to poor performance in IT products such as semiconductors, wireless communication, and computers. The average daily export value was $2.43 billion, down 9.3%. Overall industrial production also contracted by 1.4% compared to the previous month and 0.8% compared to the same month last year, as both manufacturing and service industries declined.

Nevertheless, the possibility of a “bottoming out” pattern remains valid following last month. Although export indicators are poor, there are signs of improvement. Accordingly, the direct expression of exports being ‘sluggish’ was removed compared to last month. Lee Seung-han said, “There are signs of improvement compared to when exports to China were at their worst, and there is an expectation that the second half of the year will be better than now,” adding, “We revised the wording because export indicators are not further declining and are building momentum to slightly rise.”

Meanwhile, the Korea Development Institute (KDI), a government-funded research institute, recently also forecast that the domestic economy is passing its bottom. Earlier this year, KDI had described the economic slowdown as ‘becoming visible,’ ‘deepening,’ and ‘continuing.’ However, in its ‘June Economic Trends’ report released on the 11th, KDI stated, “Although the manufacturing sector remains sluggish, indicators suggesting the economy is at its bottom are increasing.”

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