Korea Development Institute (KDI), a national policy research institute, evaluated that Korea's economic slump is continuing. Following the previous month's addition of the term 'economic slowdown', this month it assessed that 'the overall economy remains in a weak state'.
In the 'June Economic Trends' released on the 10th, KDI diagnosed that 'our economy remains in a weak state as the construction industry is sluggish, and exports are also slowing down due to U.S. tariff increases.'
KDI analyzed that the downward pressure on the economy expanded from January to April this year, and last month, it raised concerns by stating that 'indicators suggesting an economic slowdown in Korea are emerging.' This month, it emphasized the 'continuation of economic sluggishness.' Jung Kyu-chul, KDI Deputy Minister, explained, 'The economy has not particularly worsened, but the situation continues to lack vigor.'
KDI particularly focused on the slump in construction investment. KDI noted, 'As construction investment declines significantly, it constrains domestic recovery,' and remarked, 'The growth rate in production has also weakened, centering on the construction industry.'
In April, overall industrial production decreased by 0.4% compared to the previous month due to slumps in construction and slowdowns in service industries. Construction sector production showed severe sluggishness, decreasing by 20.5% compared to the prior month.
Facility investment in April increased by 8.4% compared to the previous month, recording a favorable rate due to significant growth in semiconductor-related investments and transportation equipment. However, investments in machinery excluding semiconductors, such as general industrial machinery (-5.8%), electrical and electronic devices (-0.7%), and other equipment (-3.5%), decreased compared to the previous month. Construction performance in the same month also decreased by 20.5% compared to the previous month, widening the decline.
KDI analyzed that exports continue to slow down due to the impact of U.S. tariff increases. In May, exports decreased by 1.3% compared to the same month last year, and the daily average export growth rate was only 1%. KDI assessed that 'weakness is becoming visible in sectors greatly affected by U.S. tariff increases.'
The growth in employment is also limited. In April, the number of employed increased by 194,000 due to sluggishness in the construction and manufacturing industries. Particularly, employment excluding temporary workers aged 65 and over in public administration and health and welfare services increased by only 41,000.
However, the alleviation of domestic political uncertainty and progress in U.S.-China trade negotiations improve household and corporations' sentiment indicators, which is a positive sign. In May, the consumer sentiment index was 101.8, above the standard value of 100. The contraction of consumer confidence, which had continued since December last year, shows signs of easing. KDI remarked, 'As the high-interest rate policy is relaxed, it could act as a positive factor for future consumption.'