Government: "Moderate Improvement in Domestic Demand"... Positive Outlook for Two Consecutive Months Since COVID-19

Office workers are having a meal at a restaurant in Seoul. Photo by Jinhyung Kang aymsdream@

[Sejong=Asia Economy Reporter Moon Chaeseok] The government has assessed that "domestic demand is showing a gradual improvement trend" in the Korean economy. This is due to noticeably revived consumer sentiment, with department store sales and card approval amounts showing double-digit growth rates for two consecutive months. However, risks such as the recent persistent number of COVID-19 cases and inflation concerns caused by oil prices rising to the $60 per barrel range have been pointed out as risk factors.

The Ministry of Economy and Finance evaluated in the May issue of the 'Recent Economic Trends (Green Book)' published on the 14th that "domestic demand is showing a gradual improvement trend due to the easing of sluggishness in face-to-face services, and employment has increased significantly." This is a more positive expression than the government's previous assessment last month, which judged that "domestic demand sluggishness has eased" for the first time since the COVID-19 outbreak, after using the term 'domestic demand sluggishness' for eight consecutive months since September last year.

The improvement in domestic demand is clearly detected in the private consumption indicators last month. The consumer sentiment index in April was 102.2, marking the highest level since January last year at 104.8 before the COVID-19 pandemic. It also exceeded 100 for two consecutive months after recording 100.5 in March for the first time in one year and two months. A consumer sentiment index above 100 means that the current economy is evaluated as better than average.

Department store sales increased by 26.8% compared to the same month a year ago, and domestic card approval amounts rose by 18.3%. Both figures showed double-digit growth rates for two consecutive months, which is the first time since July 2016 and March 2017, respectively.

Employment indicators also improved. The number of employed persons last month was 27,214,000, an increase of 652,000 compared to the same month a year ago. This increase is about twice as large as the 314,000 in March.

However, quarantine and inflation risks are still considered to remain. A Ministry of Economy and Finance official explained, "Externally, economic recovery expectations continue mainly in major countries due to vaccine and policy effects, but the spread of COVID-19 in emerging countries and inflation concerns also persist," adding, "To solidify the economic recovery trend and stabilize people's livelihoods, we will strengthen policy responses such as revitalizing exports and domestic demand and job recovery, and make thorough efforts to manage internal and external risks."