▲ Economic outlook. ⓒYonhap News
The
Korea Development Institute (KDI), a national research institute, has raised concerns that the recovery of the real economy is ‘slowening’ beyond the deepening uncertainty in the aftermath of the prolonged re-spread of Corona 19 (Wuhan pneumonia) from China. A ‘red light’ has been lit on achieving 4% economic growth this year.
In the ‘October Economic Trend’ released on the 7th, KDI said, “Recently, the recovery of the Korean economy has slowed as the face-to-face service industry slump has worsened due to the prolonged re-spread of Corona 19 and strengthening quarantine measures.” KDI continued, “The global economic uncertainty is also increasing and downside risks are increasing.”
KDI diagnosed the economic recovery for the first time since the
COVID-19 crisis in May and June, but again mentioned the uncertainty in July when the 4th
COVID-19 pandemic began, and evaluated that uncertainty is deepening for three consecutive months since August. However, KDI evaluated that the Korean economy ‘maintains a gradual economic recovery’ in July and September, but saw the economic recovery slowed down this month.
KDI said, “All industrial production in August increased by 6.0% from a year ago, but decreased by 0.2% from the previous month (seasonally adjusted). It decreased by 0.6%.”
Regarding consumption, KDI said, “The face-to-face service industry is also sluggish due to the re-spread of Corona 19 while the increase in retail sales has slightly decreased.” Looking at the industrial activity trends of the National Statistical Office, the retail sales index, which shows consumption trends in August, recorded 118.5. This is an increase of 3.8% from a year ago. However, it was significantly lower than the previous month (7.9%). Compared to the previous month, it decreased by 0.8%. It declined for the second month in a row following July (-0.5%).
The problem is that the improvement trend is weakening not only in the sluggish consumption and service sector, but also in the manufacturing sector. Considering that our industrial structure is centered on manufacturing and highly dependent on trade, this can be a potential destabilizing factor that increases uncertainty. KDI analyzed that “external demand is still maintaining a good trend,” but “economic uncertainty is increasing as the manufacturing sentiment index continues to decline due to rising raw material prices and unrest in logistics.”
According to KDI, the BSI forecast for the manufacturing industry has been falling for three months in a row from 101 in July to 96 in August, 94 in September and 92 in October. KDI said, “While uncertainties in the supply and demand of intermediate goods in some industries such as automobiles continue, the downside risk to external conditions is also increasing due to concerns over US monetary policy and Chinese corporate debt.” high predicted.
However, KDI evaluated that exports, which have served as the backbone of the Korean economy, are showing a good trend, maintaining a high growth rate on a daily average basis.
KDI diagnosed that some negative signals remain in the labor market as well. Although the impact of the re-spread of COVID-19 is limited, there are concerns that the economic activity participation rate is declining (seasonally adjusted compared to the previous month).
