Government Issues "Concerns Over Economic Slowdown" for Four Consecutive Months... Growing Warnings Amid Inflation and Export Worries

Ministry of Economy and Finance Announces 'Recent Economic Trends September Issue'

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Kwon Haeyoung] The government has diagnosed that concerns over economic slowdown are deepening due to high inflation levels and weakening export recovery. This marks the fourth consecutive month of warnings since the first mention of economic slowdown in June, indicating that the downside risks to the economy have intensified.

The Ministry of Economy and Finance announced the 'Recent Economic Trends September Issue (Green Book)' on the 16th, providing this assessment.

The ministry stated, "Recently, our economy has seen a moderate improvement in domestic demand due to employment and recovery in face-to-face service industries, but high inflation persists due to external factors. Economic sentiment is also somewhat affected, raising concerns about economic slowdown such as weakening export recovery." The government has maintained this diagnosis for four months since first expressing concerns about economic slowdown in the June Green Book.

The ministry analyzed, "Globally, inflation continues, and due to factors such as accelerated interest rate hikes by major countries, China's lockdown measures, and uncertainties in energy supply and demand, volatility in global financial markets and downside risks to the world economy persist."

In fact, indicators of economic slowdown are appearing in various areas. Looking at key indicators of industrial activity trends in July, manufacturing production decreased by 1.3% compared to the previous month, leading to a 0.1% decline in total industrial production. Retail sales fell by 0.3% during the same period, and facility investment and construction investment also decreased by 3.2% and 2.5%, respectively. The composite leading index cyclical component (99.4), which indicates future economic trends, dropped by 0.3 points from the previous month.

On the bright side, the consumer price inflation rate in August eased to 5.7% due to a slowdown in petroleum product prices. Employment indicators also showed favorable signs, with the number of employed persons in August increasing by 807,000 compared to the same month last year, maintaining an upward trend.

However, the outlook is not optimistic. Bang Gi-seon, the first vice minister of the Ministry of Economy and Finance, said at the emergency economic vice ministerial meeting that "economic uncertainties are expanding due to worsening external conditions, high inflation, and consumption contraction caused by interest rate hikes," and forecasted that "employment indicators will gradually show a slowdown in growth."

In financial markets, concerns over U.S. monetary tightening resurfaced, leading to continued rises in the exchange rate and government bond yields. The won-dollar exchange rate is currently approaching the 1,400 won mark.

A ministry official emphasized, "We will respond comprehensively to stabilize people’s livelihoods, including typhoon damage recovery and price stabilization after Chuseok," and added, "We will strengthen efforts to revitalize the private economy, manage risks, and accelerate the implementation of structural reform tasks by sector."