"Worries Become Reality"... Ministry of Economy and Finance Green Book "Increasing Downward Pressure on the Economy"

The Ministry of Economy and Finance recently assessed that economic sentiment has weakened due to increased domestic and international uncertainties, leading to a slowdown in employment and rising downward pressure on the economy. Compared to last month’s mention of concerns about growing downside risks, the economic outlook has become even darker.

On October 13, a job posting was displayed on the bulletin board of an employment center in Seoul, showing that the number of employed people increased by 83,000 compared to the same month last year, falling below 100,000 for the first time in four months. Photo by Kang Jin-hyung

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On the 17th, the Ministry made this diagnosis in the January issue of the ‘Recent Economic Trends (Green Book).’ In last month’s Green Book, the phrase ‘gradual economic recovery’ was removed, and it was noted that “there is a concern that downside risks may increase due to the expansion of domestic and international uncertainties, including weakened household and corporate economic sentiment.” Additionally, until last month, the report continued to mention that “our economy is maintaining price stability.”

This month, the expression “concerns about increasing downside risks” shifted to an assessment that “downward pressure has increased.” This judgment reflects the realization of concerns as economic sentiment weakened following the emergency martial law situation in December last year, the subsequent impeachment political turmoil, and the December 29 Jeju Air passenger plane accident.

Kim Gwi-beom, head of the Economic Analysis Division at the Ministry, said, “The industrial activity trend announced in November showed a weak flow (in reality), and the increase in the number of employed people turned negative in December (for the first time in 3 years and 10 months). Also, the consumer sentiment index in December dropped by 12.3 points compared to the previous month, which was a considerable decline.” He added, “Based on these situations, we removed the word ‘concern.’”

Starting this month, the Green Book has omitted mentions of inflation, which had been included since April 2022, and added an evaluation of the employment situation. This is the first time since January last year that employment has been assessed. Kim explained, “Although inflation remains stable, employment indicators have recorded negative figures, so we judged that employment has become more important from a macroeconomic perspective going forward.”

Recent economic indicators are unfavorable. In particular, consumer sentiment, which froze after the emergency martial law situation, appears to have partially reflected in the employment sector. The number of employed people decreased by 52,000 in December last year, turning negative for the first time in 3 years and 10 months. The employment rate for those aged 15 and over also fell by 0.3 percentage points year-on-year to 61.4%. The number of unemployed rose by 171,000 from the previous year to 1,115,000.

Recovery in domestic demand, including consumption and investment, remains weak. Retail sales in November increased by 0.4% compared to the previous month, but the consumer sentiment index in December plunged by 12.3 points to 88.4. December mart sales also decreased by 3.0% year-on-year. The Ministry expects that while the decline in mart sales and retail sales in December will act as negative factors, increases in credit card approvals (5.4%), domestic sales of passenger cars (6.7%), and department store credit card approvals (2.3%) will serve as positive factors.

The facility investment index in November also fell by 1.6% from the previous month due to a decrease in machinery investment (-2.0%). Construction output (constant prices) in November declined by 0.2% from the previous month as building construction decreased (-2.9%) despite improvements in civil engineering works (7.7%). Exports, another pillar of the economy, continue to show a solid trend, with December setting a record for the highest exports ever. December exports increased by 6.6% year-on-year, marking 15 consecutive months of positive growth.

Regarding the global economy, the Ministry diagnosed that “while an overall recovery is underway, geopolitical risks remain, and uncertainties are increasing due to possible changes in the trade environment.” It added, “We will use the Economic Relations Ministers’ Meeting as a control tower and cooperate with related agencies to swiftly implement the 2025 economic policy direction and manage the economy as stably as possible.”

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