KDI "Economic Downturn Eases Due to Semiconductor Recovery"

Export containers are loaded onto a ship at Busan North Port. Photo by Kang Jin-hyung aymsdream@

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Despite a slowdown in domestic demand due to prolonged high interest rates, exports have shown signs of recovery, easing the economic downturn, according to an analysis by a government-funded research institute.

The Korea Development Institute (KDI) diagnosed in its "March Economic Trends" report released on the 10th that although domestic demand continued to weaken, the recovery in exports has partially alleviated the economic slump. KDI has mentioned the domestic demand slowdown for four consecutive months since December last year.

Construction production temporarily increased, but consumption and facility investment remained sluggish amid the ongoing high interest rate environment. KDI analyzed, "The increase in construction production was mainly due to temporary factors such as the concentration of finishing works, and considering the weakness in leading indicators, the high growth rate is expected to be adjusted in the future."

KDI further pointed out, "While retail sales continued to slow down, service sector production also showed weakness, particularly in accommodation and food services," adding, "The reduced spending capacity caused by the high interest rate environment and the expanded price increases in some items due to deteriorating supply conditions will act as negative factors for consumption."

It evaluated that the economic downturn is easing due to the export recovery driven by the semiconductor industry's favorable conditions. As concerns over the global economic downturn diminish, the global trade slowdown is also easing, positively impacting exports.

The manufacturing sector continued its recovery, maintaining high growth rates in production (13.7%) and shipments (9.6%), centered on semiconductors. Inventories also sharply decreased, mainly in semiconductors (-16.6%) and electronic components (-16.0%).

Exports continued to recover, led by semiconductors. Although exports in February increased by 4.8%, a smaller rise compared to the previous month (18.0%) due to fewer working days, the daily average growth rate was higher at 12.5% compared to 5.7% in the previous month.

Imports decreased by 13.1% due to falling prices of energy resources (crude oil, petroleum products, gas, coal) and sluggish domestic demand. With exports continuing to recover and imports sharply declining, the trade surplus ($4.29 billion) significantly expanded compared to the same month last year (-$5.38 billion).

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