Ministry of Economy and Finance: "Domestic Demand Uncertainty Expands Again Due to COVID-19 Resurgence"

July Recent Economic Trends Announcement

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kim Hyun-jung] The government recently forecasted that uncertainties related to domestic demand, which had shown a steady recovery, could increase due to the resurgence of COVID-19. Although online and department store sales surged last month and consumer sentiment showed improvement, the rapidly rising number of COVID-19 cases is expected to threaten this trend.

On the 16th, the Ministry of Economy and Finance stated in the 'July Recent Economic Trends (Green Book)' that "Recently, our economy has continued a steady recovery in exports and improvement in domestic demand, with employment showing a significant increase; however, uncertainties related to domestic demand may expand due to the resurgence of COVID-19." Furthermore, it explained, "Externally, expectations for global economic recovery centered on major countries continue, but concerns about inflation persist, and the spread of COVID-19 has expanded again due to variant viruses," reiterating the inflation concerns that have been mentioned since March through the Green Book.

So far, indicators show that private consumption is maintaining a favorable trend. Last month, domestic card approvals increased by 8.4% compared to the previous year, and department store sales rose by 10.3%, both continuing a five-month growth streak. Online sales increased by 43.9%, but discount stores saw a decline of 2.4% compared to the previous year after a rebound of 6.8% last month. The Consumer Sentiment Index (CSI) last month was 110.3, up 5.1 points from the previous month. A CSI above 100 indicates that consumer sentiment is optimistic compared to the long-term average.

Consumer prices fell by 2.4% compared to the same period last year, as prices of agricultural, livestock, and fishery products continued to decline and the base effect of petroleum products eased, reducing the rate of increase. The living cost index, a perception-based indicator, rose by 3.0%, a smaller increase than the previous month (3.3%), and the fresh food index also rose by 10.3%, a somewhat smaller increase than last month (13.0%).

Kim Young-hoon, head of the Economic Analysis Division at the Ministry of Economy and Finance, explained, "While focusing on thorough quarantine responses and managing domestic and external risks, we will also make every effort to promote the second supplementary budget and the economic policy direction for the second half of the year aimed at economic, employment, and livelihood recovery, as well as COVID-19 quarantine and damage support."