Seoul - South Korea is facing a deceleration in domestic consumption, as evidenced by the service sector's slowest growth rate in 32 months this November. This slowdown is attributed to high interest rates and inflation, as per government data released on Sunday.
According to Yonhap News Agency, Statistics Korea reported that the output in the service sector increased by only 0.8 percent last month compared to the same period in the previous year, the lowest year-on-year growth since a 0.8 percent decline in February 2021. The service sector had shown signs of recovery in the second half of 2021, averaging an 8.5 percent on-year growth in the third quarter of 2022.
However, 2022 witnessed a sharp downturn in service-sector activity, with growth rates falling to 2.3 percent in the second quarter and further declining to 1.9 percent in the third quarter. Industries such as accommodations, restaurants, arts, sports, and leisure were particularly impacted by the economic slowdown.
The high interest rates and inflation are expected to persist into the first half of the next year. Bank of Korea (BOK) Governor Rhee Chang-yong indicated in October that the central bank's tightening policy would continue until there is confidence that inflation will stabilize at the bank's target of 2 percent. This suggests a period extending beyond six months.