Seoul: South Korea's economy continues to face downward pressure due to a delayed recovery in domestic demand and slowing exports, but there are some positive signs, such as improving consumer sentiment, the finance ministry said Friday. In its latest monthly economic assessment, known as the Green Book, the Ministry of Economy and Finance highlighted ongoing downside risks for the seventh consecutive month. It cited weak consumer spending, sluggish construction investment, continued challenges in the labor market, and deteriorating export conditions as such risks.
According to Yonhap News Agency, the ministry slightly toned down its assessment by omitting the term "increasing" in reference to downside risks, suggesting a cautious shift in tone. "Despite persistent downward pressure from slowing exports and worsening external conditions due to U.S. tariffs, there are also signs of improvement, such as improving consumer sentiment," the report said. The ministry pointed to a recent improvement in certain consumer sentiment indexes while expressing hope that the planned consumption coupons may help revitalize domestic demand in the coming months.
In May, retail sales remained sluggish across most sectors. Sales of semidurable goods, such as clothing, fell 2 percent from the previous month, while durable goods, including home appliances, declined 1.4 percent, according to government data. On a yearly basis, overall retail sales edged down 0.1 percent. The ministry noted that improving consumer sentiment and a rise in the number of Chinese tourists visiting South Korea could serve as positive factors for June's retail performance. The number of Chinese tourists to the country jumped 28.8 percent from a year earlier in June, while domestic credit card spending rose 4.5 percent.
"This should not be interpreted as a shift to an overly optimistic view," said Cho Sung-joong, a ministry official. "Downside risks and uncertainties remain substantial, and we are not taking a positive economic outlook for granted." In May, industrial production and facility investment both fell from the previous month. Industrial output dropped 2.9 percent on-month, mainly due to a contraction in the mining and manufacturing sectors, key drivers of the economy.
Meanwhile, the labor market continued to show some resilience, with more than 180,000 new jobs added in June, marking the sixth consecutive month of employment growth. However, job losses persisted in the manufacturing and construction sectors. Exports rebounded in June, rising 4.3 percent on-year, supported by strong global demand for semiconductors. The gain marked a turnaround from an on-year decline in May.
"Exports have held up relatively well through the second quarter and into early July," Cho said. "However, concerns persist over global trade and growth slowdowns due to worsening trade conditions, including tariffs imposed by major economies, and continued volatility in international financial markets." The ministry earlier pledged to swiftly implement the recently approved supplementary budget and focus interagency efforts on the rollout of the consumption coupons aimed at boosting domestic demand and revitalizing local economies.