State-run think tank Korea Development Institute (KDI) formerly raised alarm about the Korean economy falling into a recession upon identifying sharp deterioration in exports against still-lethargic domestic demand.

KDI has cautioned about “gradual” slowdown in monthly reports since November. In its latest report on January, turned decisively negative, noting “continued” weakening in the economy as exports worsened on top of poor domestic demand.

Exports in December fell 1.2 percent on year – the first contraction since September 2016 – primarily led by shipment falls of 8.3 percent in semiconductor and 6.1 percent in petrochemicals, the two primary drivers of Korean exports throughout last year.

The fall in exports is expected to widen in January as chip shipments that took up 20 percent of Korean exports last year plunged 27.2 percent on year in the first 10 days this month.

Reflecting its bleaker view on the economy, the KDI in November revised down its outlook on the national economic growth for 2019 from the previous forecast of 2.7 percent to 2.6 percent, more conservative than the government’s 2.8 percent and the Bank of Korea’s 2.7 percent forecasts. Its growth projection for this year also indicated that the country’s economy would grow slower than its potential growth rate of between 2.7 percent and 2.8 percent, KDI said.

The KDI concluded in the latest report that exports, the country’s main growth driver, have been faltering amid rising global uncertainties, adding further woes to the local economy. For the domestic front, weak consumption and shrinking investment are also responsible for the sluggish economy, it suggested.

“Private consumption is slowing down while consumer sentiment remains negative,” it said, adding that both of the facility and construction investment plummeted and related leading indicators are also sluggish.

Consumer sentiment is getting worse due to the grim economic indicators. According to a survey released by the KDI on the same day, 44.7 percent of the respondents said the housing prices would go down this year, significantly up from 27.5 percent response rate for the same survey done previous quarter. Just 24.3 percent of the respondents found that the prices would rise, plunging from 46.1 percent in the previous quarter.

By Moon Jae-yong and Choi Mira

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]