South Korea has experienced a continued contraction in domestic demand though rising exports have mitigated an economic slowdown, a state-run think tank said Sunday. "Domestic demand remains sluggish, yet exports are rapidly growing, thereby easing the contraction in economic activity," the Korea Development Institute (KDI) said in a monthly economic assessment report. "The value of construction completed exhibited a temporary uptick, yet both consumption and equipment investment continue to stagnate under the strain of sustained high interest rates," it added. Retail sales, a gauge of private spending, advanced 0.8 percent on-month in January, but the figure shed 3.4 percent on an on-year basis, extending its losing run to the seventh consecutive month. Facility investment added 4.1 percent on-year, but the growth was largely attributable to such temporary factors as base effects and additional working days. In a seasonally adjusted on-month term, it fell 5.6 percent. "Domestic demand risks linger; del inquency rates on household and personal business loans have stayed high and certain items, such as agricultural products, are experiencing an increasing inflationary trend due to deteriorating supply-side factors," the report read. In contrast with weak consumption and investment, exports have shown a recovery trend driven by solid demand for semiconductors. Exports rose for the fifth consecutive month in February after a yearlong downturn. "Concerns over a global economic downturn and dwindling global trade have eased, and the circumstances act as a supportive factor for exports," the KDI said. Speaking of inflation, the think tank said that supply-side inflationary pressure intensified to accelerate the growth of consumer prices. But it pointed to the continued easing of underlying inflation. In February, consumer prices, a key gauge of inflation, rose back to over 3 percent in a month to stand at 3.1 percent on high prices of fruits and other farm produce, as well as global oil prices. The governmen t has said that consumer prices are forecast to ease at a slower pace than earlier expected before reaching their target rate of 2 percent by around the end of 2024. The finance ministry expected this year's prices to grow 2.6 percent. Source: Yonhap News Agency