"Slowing Game Momentum"... Government's First Official Diagnosis

February Green Book
"Concerns of Slowdown" to "Slowdown" Assessment
Last Month's Exports Down 16.6%... Record High Trade Deficit
Employment Growth Declines for 8 Consecutive Months

[Asia Economy Sejong=Joo Sang-don, Song Seung-seop reporters] The government has issued a darker diagnosis of the recent state of our economy, stating that the "economic flow has slowed down."

On the 17th, the Ministry of Economy and Finance announced through the "February Recent Economic Trends (Green Book)" that "Recently, our economy has seen a slowdown in economic flow as inflation remains at a high level, the pace of domestic demand recovery is moderate, export sluggishness and corporate sentiment contraction continue."

The expression "concerns about economic slowdown" first appeared in the Green Book in June last year. This phrase was maintained for seven consecutive months until December last year, and in January this year, the concerns about economic slowdown were assessed as "expanded." This time, it confirms that the concerns about economic slowdown have become a reality.

The background for this assessment includes a decrease in exports, a reduction in the increase of employed persons, and a decline in production across all industries. First, the export decline widened last month, increasing the trade deficit. Exports amounted to $46.27 billion, plunging 16.6% compared to the same period last year. This was worse than the 9.5% decrease in December last year. Meanwhile, imports in January this year were $58.96 billion, decreasing by only 2.6%, resulting in a trade deficit of $12.69 billion last month. This marks the 10th consecutive month of deficit. The deficit size is $3.23 billion larger than the record monthly trade deficit of $9.435 billion in August last year. Compared to the previous month's trade deficit (-$4.69 billion), the deficit nearly tripled.

Production across all industries also turned to a decline. It had increased by 0.1% month-on-month in November last year but decreased by 1.6% in December. This is the largest drop in 32 months since April 2020 (-1.8%). Manufacturing production also shifted from a 0.4% increase to a 2.9% decrease during the same period.

The current economic diagnosis and outlook have also darkened. The coincident index cyclical component, which indicates the current economy, fell from -0.7 points in November last year to -0.9 points in December. The leading index cyclical component, which predicts future economic conditions, also dropped from -0.2 points to -0.5 points during the same period.

The employment market has further frozen. The increase in employed persons in January this year was 411,000, marking the eighth consecutive month of slowdown in the increase that began in June last year. The increase is the lowest in 22 months. In particular, manufacturing employment decreased by 35,000 from 4.467 million in January last year to 4.432 million in January this year. This marks the first decline in manufacturing employment in 15 months since October 2021 (-13,000). This trend is expected to continue unless exports improve.

On the other hand, inflation has rather expanded its rise and continues to soar. Consumer prices in January rose by 5.2% due to factors such as the beginning of the year price increases, which is a larger increase than the 5.0% in December last year. The core inflation rate, which shows the underlying trend of prices, also rose from 4.9% to 5.0% during the same period.

In January this year, the financial market saw stock prices rise and treasury bond yields and exchange rates fall due to expectations of China's reopening and a slowdown in monetary tightening. The decline in housing sale and jeonse prices last month narrowed to -1.49% and -2.29%, respectively, compared to the previous month.

A Ministry of Economy and Finance official said, "Externally, uncertainties in the global economy continue as downside risks intersect, including China's reopening, expectations for a soft landing of the global economy, the monetary tightening stance, and concerns over the prolonged Russia-Ukraine war. Under a firm policy of price stabilization and easing the burden on people's livelihoods, we will make every effort to revitalize exports and investment, improve the economic structure through the three major reforms and energy efficiency enhancement, and thoroughly manage domestic and external risks."