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Gov't warns of 'downward pressure' for 3rd consecutive month in latest economic report

Published: 14 Feb. 2025, 16:22

Pedestrians walk on the street in Meyong-dong, central Seoul, on Feb. 3. [YONHAP]

The Korean economy faces "increasing downward pressure" due to heightened uncertainties both domestically and globally, leading to weakened economic sentiment amid a slowdown in domestic demand recovery and employment, the Ministry of Economy and Finance said Friday.

In its monthly economic report, the Green Book, the Finance Ministry cited downward pressure for the third consecutive month, attributing it to domestic political uncertainties and an escalating global trade war fueled by U.S. tariff plans.

"The global economy continues to face geopolitical risks, with growing trade uncertainty due to the implementation of major tariff measures," the report said. Since taking office last month, U.S. President Donald Trump has escalated tariffs on key trading partners."

The latest assessment builds on the December report, where the ministry first highlighted downward pressure following President Yoon Suk Yeol's brief declaration of martial law Dec. 3.

In November, the ministry had already softened its language, shifting its outlook from "recovery" to "gradual recovery."

Compared with last month's report, the phrase "slowdown in domestic demand recovery" has been newly added.

"The domestic political situation that has continued since the end of last year is the main factor in weakening consumer sentiment," said Cho Sung-joon, a finance ministry official.

The ministry's latest update comes somewhat late compared to forecasts from other institutions, including the Korea Development Institute, which had raised concerns over domestic demand since the second half of last year.

The government plans to mobilize all available resources to swiftly implement measures aimed at job creation, financial support for low-income households and assistance for small businesses, the report said.

Additionally, the government has vowed to actively respond to trade uncertainties, including supporting domestic companies affected by the latest U.S. tariff plan, it noted.

Korea added 135,000 jobs in January, marking a turnaround from an on-year decline in the previous month, according to the report.

"Although the overall number of employed people has increased, employment difficulties persist, particularly among youth, construction workers, temporary laborers and small business owners," Cho said.

Consumer prices, a key gauge of inflation, grew 2.2 percent from a year earlier in January, marking the largest on-year increase since July, largely due to a weak local currency that pushed up import prices.

In December, Korea's industrial output rose 2.3 percent from the previous month on strong demand for semiconductors and automobiles. The on-month gain followed three consecutive months of decline.

Facility investment rose 9.9 percent from the previous month in December, continuing an overall upward trend.