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Korea’s consumption slowdown decelerates, but exports keep sliding: KDI

South Korean consumers shop at a local retailer in Seoul on Sunday. (Yonhap)
South Korean consumers shop at a local retailer in Seoul on Sunday. (Yonhap)
South Korea’s consumption has recovered slightly on the back of the government’s emergency cash handout, but its economic activity and exports remain sluggish, still weighed down by risks stemming from the coronavirus pandemic, a state-run think tank said Wednesday.

“The slowdown in Korea‘s consumption has decelerated, but economic activity remains sluggish due to falling external demand on the global spread of COVID-19,” the Korea Development Institute said in its monthly publications on economic trends. The report is published in both Korean and English.

The country’s growth in overall industrial production in May slowed down on-month from minus 5.3 percent to minus 5.6 percent, data from the report showed, “exhibiting a decreased growth from last month in all sectors, excluding public administration.”

Automobiles, electric parts and metalworking all saw major losses, but services production’s contraction has slowed down due to relaxed quarantine policies and the emergency relief fund.

The manufacturing sector continued to see decline in both outbound shipments and capacity utilization rate, which measures its productive capacity and output. The rate fell some 5 percentage points on-month to 63.6 percent, nearing the lowest level observed in the past two economic crises of 1997 and 2008.

The country’s contracting outbound shipments, remained a major concern, as “exports continued to slide by a large margin due to falling external demand.”

While exports last month displayed a reduced contraction of minus 10.9 percent compared with the previous month’s minus 23.6 percent, due to increased workdays, average outbound shipments per day maintained a similar level of around minus 18.5 percent in the cited period.

Outbound shipments of automobiles, auto parts and petroleum products continued to struggle, while those of semiconductors slowed in growth. Exports to the US and EU declined but shipments to China expanded in the same period.

For the labor market, the number of employed saw a reduced decline on-month in May, mainly in services. The employed population here contracted by 392,000 in May compared with the corresponding figure of 476,000 for the previous month.

Asia’s fourth-largest economy is forecast to contract by 1.2 percent this year, the Organization for Economic Cooperation and Development said last month, bleaker than the Bank of Korea projection of 0.2 percent, but rosier than other OECD members.

“Meanwhile, as major countries restart their economic activity, expectations for a recovery are rising,” KDI noted.

“But, the number of COVID-19 cases is rising both domestically and globally, and it looms as a potential downward risk to the economy.”

By Jung Min-kyung (