SEOUL: The South Korean economy is at risk of losing steam, according to the Finance Ministry, as unfavourable external economic conditions are projected to impede investment and export growth amid high inflation.
According to the Ministry’s monthly economic assessment report, known as the Green Book, market volatility and global economic downside risks have intensified as a result of the Federal Reserve’s faster monetary tightening and global supply chain disruptions, as reported by the media. “With a continual increase in pricing pressure,” the report observed, “there are concerns about the economic slowdown due to sluggish investment and the feeble recovery of exports.”
The government issued a more negative assessment than the previous month, citing growing concerns about stagflation, which is defined as a combination of falling GDP and high prices.
Because of the long-running conflict between Russia and Ukraine, inflationary pressure has risen swiftly due to rising oil and commodity prices, as well as a recovery in demand. In May, South Korean consumer prices grew by 5.4 percent year on year, the largest increase in over 14 years and a comeback from April’s 4.8 percent gain.
Exports, which are the key driver of economic growth, grew by 21.3 percent year over year in May, extending a 19-month winning streak. However, rising fuel prices pushed up import expenses, resulting in a trade deficit for the second month in a row.