SEOUL — Despite a robust performance in exports, particularly from the information technology (IT) sector, South Korea is grappling with weak domestic consumption and investment, according to a recent report by the Korea Development Institute (KDI).
According to Yonhap News Agency, the South Korean economy is facing a moderate downturn, with the rapid growth in exports, especially in the semiconductor industry, providing some buoyancy. However, the KDI's report highlights ongoing concerns about domestic demand, which has been weak for five consecutive months. "But consumption remains weak, particularly in goods consumption, as financing conditions are not improving due to persistent high interest rates. Though equipment investment exhibited some positive signs, construction investment is now experiencing a slight moderation," the institute observed.
The report provides a more optimistic outlook on exports compared to last month, noting a 3.1 percent year-on-year increase in March, fueled by strong chip sales. This marks the sixth consecutive month of growth for South Korea's exports, a critical component of the country's economic growth.
Industrial output also showed positive trends, rising for the fourth consecutive month by 1.3 percent in February, driven by a surge in semiconductor production. On an annual basis, mining and manufacturing production increased by 4.8 percent in February, with semiconductor output jumping an impressive 65.3 percent from the previous year.
Despite these gains, the construction sector faces challenges, as indicated by significant declines in construction orders received and the area for which building permits were issued. These trends suggest a potential continuation of the slowdown in construction investment, the KDI warned.
The report also highlighted external risk factors that could impact South Korea's economic outlook, including rising international oil prices and transportation disruptions caused by geopolitical tensions.