"Domestic Demand Improves, Semiconductor Exports Strong... Korean Economy Moves Out of Slump and Into Recovery"

"Recent Economic Trends (Green Book)" November Issue

The government has officially assessed that the domestic economy has entered a recovery phase. This marks a step forward from last month's evaluation, which described the situation as showing an "overall trend of improvement."

In the November issue of the "Recent Economic Trends (Green Book)" published on the 14th, the Ministry of Economy and Finance evaluated the current economic situation by stating, "The recovery trend continues, escaping the sluggishness of the first half of the year, thanks to improvements in domestic demand such as consumption and robust exports led by semiconductors." In August, the government removed the phrase "downward pressure on the economy." In the September issue, it described "strengthened positive signals of economic recovery," and in the October issue, it raised the tone further by stating that the economy was "emerging from the sluggishness of the first half of the year."

Real economy indicators are showing signs of improvement. According to the September industrial activity trends, mining and manufacturing production decreased by 1.2% due to some adjustments in semiconductors. However, service industry production increased by 1.8%, and construction expanded by 11.4%, resulting in total industrial production rising by 1.0% compared to the previous month. On a year-on-year basis, total industrial production increased by 6.7%, making the improvement trend even clearer. During the same period, facility investment also grew by 12.7%.

The government assessed, "The simultaneous increase in facility and construction investment is a positive factor that alleviates overall economic uncertainty." In contrast, retail sales during the same period declined by 0.1%, showing some stagnation. This was attributed to the base effect from the consumption coupon policy in August and an adjustment in consumption for certain items.

On the employment front, the improvement was particularly evident in the service sector. According to the October employment trends, the number of employed persons rebounded, increasing by 193,000 compared to a year earlier. The employment rate rose by 0.1 percentage point to 63.4%, while the unemployment rate fell by 0.1 percentage point to 2.2%. A significant portion of the employment increase was seen in service sectors such as health and social welfare services (an increase of 280,000), accommodation and food services, and wholesale and retail trade. In contrast, manufacturing (-51,000) and construction (-123,000) continued to decline. Due to the sluggish conditions in industries such as manufacturing, the employment rate among young people (aged 15-29) has been falling for 18 consecutive months, the longest period since the global financial crisis.

The consumer price inflation rate in October was 2.4%, up from 2.1% the previous month. Petroleum prices turned upward, and the prices of agricultural products and personal services also rose, pushing inflation higher. Core inflation, excluding food and energy, also rose for the second consecutive month, reaching 2.2%. It is assessed that fluctuations in international oil prices, agricultural product prices, and rising service prices are all contributing factors.

The national fiscal deficit has widened. The cumulative consolidated fiscal balance as of September recorded a deficit of 63.5 trillion won, more than 10 trillion won larger than the deficit during the same period last year. The managed fiscal balance showed a deficit of 102.4 trillion won, worsening compared to the previous year. The total expenditure execution rate was 77.4% (544.2 trillion won executed), and the government intends to maintain its policy of early execution for supplementary budgets and livelihood support measures.

Cargo is stacked on a container ship docked at Busan Port. Photo by Jin-Hyung Kang aymsdream@

Consumer indicators also continued to recover. In October, domestic card approval volume increased by 2.1% year-on-year, and during the same period, department store card approval volume rose by 5.6%, marking the highest growth rate since January this year (7.0%). The consumer sentiment index stood at a robust 109.8.

However, the government pointed out that uncertainty stemming from "external conditions" persists despite the economic recovery trend. In the United States, the consumer price index rose again to 3.0% in September, raising the possibility that the pace of monetary easing could slow. In China, exports in October declined by 1.1%, marking the first decrease in eight months. The downturn in China's real estate market was also identified as a variable that could negatively impact Korea's exports and financial markets.

The government assessed, "The global economy is experiencing increased volatility in international financial markets due to deteriorating trade environments caused by tariff impositions by major countries, and the possibility of a slowdown in global trade and growth still remains."

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