MoEF "Economic slowdown trend gradually easing... Signs of rebound in semiconductors and exports"

As the war between Israel and the Palestinian armed group Hamas escalates instability in the Middle East and oil prices rise, raising concerns about economic contraction, the government assessed the Korean economy as showing a "gradual easing of the economic slowdown trend."

Lee Seunghan, Director of Economic Analysis at the Ministry of Economy and Finance, is explaining the recent economic trends of October 2023 on the morning of the 13th at the Government Complex Sejong in Sejong City. [Image source=Yonhap News]

On the 13th, the Ministry of Economy and Finance stated in its 'October Recent Economic Trends (Green Book)' that "amid a slowdown in inflation and persistent uncertainties due to increased volatility in international oil prices, signs of a rebound in semiconductor and other manufacturing production and exports, along with continued improvements in the service sector and employment, indicate a gradual easing of the economic slowdown trend." The Green Book is a report containing the government's official evaluation and outlook on the current economic situation.

This assessment is interpreted as a somewhat more positive evaluation of economic recovery compared to the diagnosis in September that "the economic slowdown trend is easing." Last month, the Ministry acknowledged "monthly volatility due to rising international oil prices and seasonal factors" but still evaluated that "while the inflation slowdown trend is maintained, the economic slowdown trend is partially easing." Since February, the Ministry has consistently assessed the economy as slowing down for eight consecutive months, adding expressions of eased downside risks in June and July, and diagnosing an easing of the slowdown trend in August.

However, it pointed out that "externally, expectations for improvement in the IT industry and an increase in tourists visiting Korea are mixed with concerns over prolonged monetary tightening, while the war between Russia and Ukraine combined with instability in the Middle East continues to cause uncertainty, including increased volatility in raw material prices." The difference from last month's evaluation is the change of the phrase "partial easing of the economic slowdown trend" to "gradual easing," and the revision of "manufacturing production and exports, including semiconductors, are easing their downturn" to "showing signs of rebound."

The Ministry focused on the clear moderation of the export decline. September exports recorded $54.6 billion, down 4.4 percentage points from the same month last year, marking the smallest decline this year. Lee Seunghan, head of the Economic Analysis Division at the Ministry of Economy and Finance, said, "The rapid easing of semiconductor and exports to China has shown a favorable trend," adding, "Since production and exports, centered on manufacturing, are showing signs of rebound, we judge that the economic slowdown trend is gradually improving."

However, inflation was assessed to have expanded its rise. In September, consumer prices rose 3.7 percentage points compared to the same month last year, influenced by rising international oil prices and some agricultural product price increases due to weather conditions, despite an overall slowdown in inflation. Lee said, "Given the increased uncertainty caused by the Israel-Palestine war, vigilance regarding inflation is higher than last month." He added, "Since these countries are not oil-producing nations and are outside the oil transportation routes, the impact on oil prices and inflation is expected to be limited." Consumer sentiment also fell by 3.4 percentage points from the previous month to 99.7.

Looking at key industrial activity indicators for August, production in mining and manufacturing and services, facility investment, and construction investment increased, while retail sales decreased. Service sector production rose 0.3% month-on-month and 1.7% year-on-year. Mining and manufacturing production increased 5.5% month-on-month but decreased 0.5% year-on-year, resulting in total industrial production rising 2.2% month-on-month and 1.4% year-on-year. In the expenditure sector, facility investment increased 3.6% month-on-month and 14.9% year-on-year, and construction investment rose 4.4% month-on-month and 12.3% year-on-year. However, retail sales declined 0.3% month-on-month and 2.1% year-on-year.

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