Divergence widens between domestic demand, exports in S. Korea: KDI

SEOUL, Feb. 7 (Yonhap) -- South Korea has experienced a continued slowdown in private consumption and investment due to high interest rates, though rising exports mitigated an economic downturn, a state-run think tank said Wednesday.

"High interest rates persistently weaken the overall economy, causing ongoing weaknesses in private consumption and investment, yet export recovery, driven by the rebound in semiconductors, is alleviating the economic slowdown," the Korea Development Institute (KDI) said in a monthly economic assessment report.

The institute pointed to weak domestic demand for three months in a row.

Exports, a key growth engine, jumped 18 percent on-year in January, accelerating from a 5 percent on-year expansion a month earlier.

The growth was led by strong demand for semiconductors, which logged a 56.2 percent surge in exports last month. Overseas shipments of cars also advanced 24.8 percent on-year in January.

But retail sales, a gauge of private spending, fell 2.2 percent on-year in December, with sales of passenger cars tumbling 9.7 percent and food items falling 5.2 percent.

Construction investment is also showing signs of a slowdown, primarily in the sector of residential building construction.

"Divergence between domestic and export performance is also reflected in the production sector, as services and construction decelerate, whereas manufacturing recovers," the report read.

The KDI said weak domestic demand led to the slowdown in inflation.

In January, consumer prices rose 2.8 percent on-year, marking the first time that the figure fell below 3 percent in six months.

"There exists a risk that rising oil prices under the influence of geopolitical factors will likely exert upward pressure on inflation in the future," the KDI said.

graceoh@yna.co.kr
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