"Export-Led Economic Recovery While Domestic Demand Remains Weak... Temperature Differences Across Sectors"

The government has diagnosed that there are differences in the speed of economic recovery, with domestic demand sluggish due to prolonged high inflation and high interest rates, despite an increase in semiconductor exports, which serve as a pillar of the Korean economy. Regarding the recent slowdown in the inflation trend, the government reiterated its commitment to fully stabilize agricultural product prices, which are driving high inflation.

In the 'April Economic Trends (Green Book)' released on the 12th, the Ministry of Economy and Finance stated, "The Korean economy continues to show a recovery trend centered on production and exports, along with a high level of employment," but also assessed that "there are differences in the speed of recovery across economic sectors, such as a slowdown in goods consumption and weak leading indicators in construction."

Recently, the export recovery trend has become clear, centered on semiconductors. Last month, exports recorded $56.56 billion, an increase of 3.1% compared to the same month last year. Among the 15 major export items, exports of seven items increased, including semiconductors (36%), ships (102%), computers (25%), secondary batteries (23%), displays (16%), biohealth (10%), and wireless communication devices (6%).

The problem lies in the depressed consumption. Consumption, hampered by prolonged high inflation and high interest rates, has not found recovery momentum, making the economic recovery outlook uncertain. Retail sales, which indicate goods consumption, decreased by 3.1% last month, and service industry production increased by only 0.7%. Retail sales of durable goods, including high-priced home appliances, fell by 3.2%. As real income continues to decline due to prolonged high inflation, consumption capacity is being limited, according to analyses.

The Consumer Sentiment Index (CSI) in March was 100.7, down 1.2 points from the previous month. The CSI rose from 97.3 in November last year to 101.9 in February this year but declined this month. The increase in perceived inflation due to soaring agricultural product prices had a significant impact.

There was an expectation that the inflation rate would stabilize downward this year, but even that was affected by the sharp rise in prices of some food items such as fruit, with consumer prices rising 3.1% last month. The Ministry of Economy and Finance stated, "The inflation slowdown trend is somewhat stalling," and added, "While making every effort to quickly establish a price stabilization policy, we will focus on a balanced recovery, including spreading warmth to vulnerable sectors of livelihood and domestic demand."

Kim Byunghwan, First Vice Minister of the Ministry of Economy and Finance, is speaking about price trends at the Emergency Economic Vice Ministers' Meeting and Price-Related Vice Ministers' Meeting held on the 12th at the Government Seoul Office in Jongno-gu, Seoul. Photo by Jo Yongjun jun21@

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On the same day, Kim Byung-hwan, 1st Vice Minister of the Ministry of Economy and Finance, chaired the '38th Emergency Economic Vice Ministers' Meeting and the 17th Price-Related Vice Ministers' Meeting' at the Government Seoul Office. He announced that, as uncertainties such as inflation, international oil prices, and agricultural product prices continue, 170 tons of cabbage will be released daily this month, 5,000 tons of onions will be imported under low tariffs, and 3,000 tons of green onions will be supplied under quota tariffs without fail. Additionally, traditional market agricultural discount gift certificates worth a total of 40 billion won will be issued in April.

Regarding concerns over a sharp rise in fuel costs due to increased volatility in international oil prices, he added, "To prevent price hikes linked to oil prices and price collusion in the distribution process of agricultural and marine products, we will strengthen cross-ministerial on-site inspections and fact-finding investigations."

Regarding the 'Revival 3-Project for Population Declining Areas' announced in the economic policy direction in January, he added that specific implementation plans for tax special cases to activate second homes, plans to create small-scale tourist complexes, and expansion of region-specific visas will be finalized through the Emergency Economic Ministers' Meeting next week.

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